Chapter 6, Problem 2BTN

Assume you are a business consultant. The owner of a company sends you an e-mail expressing concern that the company is not taking advantage of its discounts offered by vendors. The company currently uses the gross method of recording purchases. The owner is considering a review of all invoices and payments from the previous period. Due to the volume of purchases, however, the owner recognizes that this is time, consuming and costly. The owner seeks your advice about monitoring purchase discounts in the future. Provide a response in memorandum form. (Hint: It will help to review the recording of purchase discounts in Appendix 4C.)