What is reserve for discount on creditors and debtors?

Shanaya,

The provision for discount on debtors is a certain percentage of debt that is receivable that a firm has decided to allow the customers as discount over the period of time. This is an expense that is booked by the firm against the debts that would be received.
And, the provision for discount on creditors is a certain percentage of amount that is payable by the firm that would receivable as discount from the suppliers over a period of time. This is an income for the firm that is booked by the firm in advance against the debts that are payable.


 

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Similar to cash discount allowed to debtors, the firm may have a chance to receive the cash discount from the creditors for prompt payment. Provision for discount on Creditors is calculated at a certain percentage on Sundry Creditors. Provision for discount on creditors will be shown on the credit side of Profit and Loss account and on the liabilities side of the Balance sheet by way of deduction from Sundry creditors.
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Not understood
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