Journal Entry for Discount Allowed
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. While posting a journal entry for discount allowed “Discount Allowed Account” is debited. Discount allowed acts as an expense of the business.
Trade discount is not shown in the main financial statements, however cash discount and other types of discounts are supposed to be recorded in the books of accounts. In case of a transaction where both trade discount and cash discount are allowed, trade discount is allowed first and then cash discount is processed.
Related Topic – Journal Entry for Discount Received
Here is the journal entry for discount allowed along with an example;
Journal Entry For Discount Allowed
|Cash A/C||Dr.||Real A/C||Dr. What Comes in|
|Discount Allowed A/C||Dr.||Nominal A/C||Dr. All Expenses (Expense)|
|To Debtor’s A/C||Cr.||Personal A/C||Cr. The Giver|
Example – Discount Allowed to Settle Accounts
- Received 5,000 from Unreal Pvt Ltd. in full and final settlement of their account worth 10,000. (Discount Allowed)
|Discount Allowed A/C||5,000|
|To Unreal Pvt Ltd A/C||10,000|