Cheque for Rs. 1,000 received from Murgan in settlement of a debt of Rs. 1,250 returned dishonoured
Journal entry
Murugan Account Dr. 1250
To Bank Account 1000
To Discount Allowed Account 250

Why this murugan a/c DR. because that cheque returned so our sundry debtor increased. Bank balance decreased so thatswhy we cr. Bank a/c till this whatever I understood is this correct.
But discount allowed is our loss so why we are putting discount allowed cr side it should be Dr side
Please explain me

How confused you are? So you have reinstated the debtor and the bank account balance and reversed the discount. All that remains is to write the debt off as a bad debt which is a debit to expense