Journal Entry for Discount Received
Discounts are very common in today’s business world, they are generally provided in lieu of some consideration which can range from timely payments to trade practices, etc. Discount received is as an income/gain for the business and is shown on the credit side of the profit and loss account.
Though trade discount is not to be accounted for in the books of accounts, cash discount and other types of discounts are supposed to be recorded, below are few cases showing the journal entry for discount.
Journal Entry For Discount Received
|Creditor’s A/C||Debit||Personal A/C||Dr. The Receiver|
|To Cash A/C||Credit||Real A/C||Cr. What Goes Out|
|To Discount Received A/C||Credit||Nominal A/C||Cr. All Incomes & Gains|
Discount used to Settle Accounts
Paid 2,000 to Star Pvt Ltd. in full and final settlement of their account for 5,000. (Discount Received)
|Star Pvt Ltd A/C||5,000|
|To Cash A/C||2,000|
|To Discount Received A/C||3,000|