Discount allowed on goods invoiced at N100,000 was calculated at the rate of 20% instead of 10%. The error is corrected by debiting

Answer Details

When the discount allowed on goods invoiced at N100,000 was calculated at the rate of 20% instead of 10%, it means that the customer was given a larger discount than intended. This error needs to be corrected. To correct this error, the discount allowed should be reduced by the difference between the amount of the incorrect discount and the correct discount. In this case, the incorrect discount was 20%, and the correct discount should have been 10%, so the difference is 10%. To calculate the correct discount, you can multiply the invoiced amount by the correct discount rate: N100,000 x 10% = N10,000 So, to correct the error, you need to debit the discount allowed account with N10,000, which will reduce the amount of the discount to the correct amount. This is because the discount allowed account is a contra-revenue account, which means it is used to reduce revenue. By debiting the discount allowed account, you are reducing the amount of the discount, which will increase the revenue. Since the discount was given to the customer, it means that the customer's account was credited with the incorrect amount of N20,000. Therefore, to reverse this transaction, you need to credit the customer's account with N10,000, which will reduce the credit balance on the account by the correct amount. Therefore, the correct answer is: "customer's account with N10,000, crediting discount allowed with N10,000".