What is the Journal Entry for Discount Allowed?


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)
Cash A/C 5,000
Discount Allowed A/C 5,000
   To Unreal Pvt Ltd A/C 10,000

 



 

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