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