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    accountingiseasy's Avatar
    accountingiseasy Posts: 7, Reputation: 1
    New Member

    Mar 19, 2010, 08:43 AM
    Discount allowed / Discount received
    My understanding of these two accounts are:

    Discount allowed is affected when the company offers a discount to a customer and it is netted against sales... thus listed in the chart of accounts as an income account.

    Discount received is affected when a vendor offers a discount on purchases and it is netted against purchases... soooo in the chart of accounts this account would be what type of account - possibly expense?

    Thanks in advance...
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member

    Mar 20, 2010, 08:34 AM

    Discounts allowed is an expense and discount received is income.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member

    Mar 21, 2010, 12:58 AM

    Since this is a real company, you can call them anything you like. I don't know where you are at, but I've never referred to them by those names.

    "Discounts allowed" could theoretically be either of them cause it's not specifying who's allowing the discount to whom. You could use that name for both.

    I have issue with the title "discounts received." Um... if I just saw that title I would assume it's the discounts you've received off your bill as a purchaser. (In other words, what you said.) I absolutely do not see that as income. First, you haven't even really "received" anything. You're just not paying as much. Not paying as much reduces your cost in something and is not by any definition of the word an "income."

    I'd say your original answers are correct. But again, since it's a real company, you can basically call the accounts what you choose. I call them sales discounts and purchases discounts - pretty clear. And the sales discounts is a contra revenue and the purchases discounts are contra expense. (Contra going against a balance.)

    Does this mean you're using a periodic inventory method?
    chloe.greg's Avatar
    chloe.greg Posts: 1, Reputation: 1
    New Member

    Feb 16, 2011, 01:32 PM
    I understand why discount receive is an income. Why does it appear on the credit side of the three column cash book and not the debit side?
    netshisaulu's Avatar
    netshisaulu Posts: 1, Reputation: 1
    New Member

    Mar 24, 2011, 06:59 AM
    To sell goods at a lower price, to maintain relationships with customers
    ibibutt381's Avatar
    ibibutt381 Posts: 1, Reputation: 1
    New Member

    Nov 19, 2011, 05:20 AM
    But why are we saying it as income or expense when we did not receive or pay anything even nothing come into our account just a fictitious transaction is done.
    dnesty's Avatar
    dnesty Posts: 1, Reputation: 1
    New Member

    Mar 10, 2012, 05:33 AM
    Name three controls over petty cash
    yulane's Avatar
    yulane Posts: 2, Reputation: 1
    New Member

    Apr 16, 2012, 01:42 AM
    Is discount received vatable or not
    ebaldeh15's Avatar
    ebaldeh15 Posts: 1, Reputation: 1
    New Member

    Apr 19, 2012, 02:48 PM
    The same question I keep asking myself all the time.y isn't it on the derbit side and allowed the other side...
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member

    Apr 19, 2012, 03:21 PM
    A sales discount will be a debit becoause it offsets Sales. A purchase discount will be a credit because it offsets purchases.
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member

    Apr 19, 2012, 07:30 PM
    Discount allowed is a deduction against sales in a trading account, discount received is other income
    wallaby's Avatar
    wallaby Posts: 1, Reputation: 1
    New Member

    Oct 3, 2012, 06:01 PM
    Well that's great! My accounts list has Discounts Given as a Cost of Sales and Discounts Taken as an expense. Obviously I need to change it but what do I do?
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member

    Oct 3, 2012, 06:38 PM

    Discounts received are a reduction of a purchase cost accounted for separately as such they are a credit balance
    Discounts allowed or given is as we have both said accounted for in the trading account
    Discounts taken would in the ordinary meaning be a discount received as in a settlement discount

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