Singh Arjun In: Category - Accounting OthersHow to calculate provision for discount on debtors?provision for discount on debtors ShareFacebook1 AnswerVotedRecent Aastha 2020-08-30T07:48:44+05:30Added an answer on August 30, 2020 at 7:48 am This answer was edited. Provision for Discount on DebtorsThe entity in order to encourage its customers to make a prompt payment allows a discount to its customers purchasing goods on credit. Thus, when the sales are made in the current reporting period on a credit basis the then the discount needs to be allowed in the next reporting period if such customer makes the payment promptly.The discount allowed reduces the revenue of an entity and hence, it can be said that provision for a discount is expected loss for an organization and so it needs to be given effect in the current accounting period.Calculation of Provision for Discount on DebtorsParticularsAmountDebtorsXXXXXLess: Bad Debts(XXXX)XXXXXLess: Provision for Bad and Doubtful Debts(XXXX)Good DebtsXXXXXLess: Provision for discount on debtors (Estimated % of Good Debts.)(XXXX)Debtors (Amount to be Shown in the Balance Sheet)XXXXXThis can also be explained with the help of an example.Illustrative ExampleCalculate Debtors Balance to be shown in the Balance SheetAn Entity has debtors worth 50,000Bad debts throughout the year worth an amount of 4000It has created a reserve for bad and doubtful debts at the end of the year worth 1000The provision for discount on debtors is estimated to be 10%. Solution:ParticularsAmountDebtors50,000Less: Bad Debts(4,000)46,000Less: Provision for Bad and Doubtful Debts(1,000)Good Debts45,000Less: Provision for discount on debtors (45,000 X 10/100)(4,500)Debtors (Amount to be Shown in the Balance Sheet)40,500Aastha.0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerCancel replyYou must login or register to add a new answer.