what is the journal entry for dicount recieved and discount allowed??please explain...thanks....
Discount Allowed- When reduction or rebate is given to costumers or debtors at the time of receiving payment, this reduction is called discount allowed. It is debited as Discount Allowed in the books of accounts because it is a loss.
Journal entries for discount allowed
1. When discount is allowed for receiving cash at the time goods sold.
For example: Sold goods Rs 5,000 and allowed discount 5% on account of immediate payment.
Journal entry
Cash A/c | Dr. | 4,750 |
|
|
Discount Allowed A/c | Dr. | 250 |
|
|
To Sales A/c |
|
| 5,000 | |
(Sold goods and discount allowed) | ||||
2. When discount is allowed at the time of receiving cash/cheque from debtors.
For example: Received from Anju Rs 2,500 in full settlement of amount due from her Rs 2,600.
Journal entry
Cash A/c | Dr. | 2,500 |
|
|
Discount Allowed A/c | Dr. | 100 |
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|
To Anju |
|
| 2,600 | |
(Amount received from Anju in full settlement of amount due from her) |
| |||
Discount Received- When reduction or rebate is received from the supplier or creditor at the time of payment, this reduction is called discount received. It is credited as Discount Received in the books of account because it is a gain.
Journal entries for discount received
1. When discount is received for payment of cash at the time of purchases of goods.
For example: Purchased goods Rs 5,000 and received discount 5% on account of immediate payment.
Journal entry
Purchases A/c | Dr. | 5,000 |
|
To Cash A/c | Dr. |
| 4,750 |
To Discount Received A/c |
|
| 250 |
(Bought goods and discount received) | |||
2. When discount is received from creditor at the time of payment.
For example: Paid Rs 2,500 to Vinod in full settlement of amount due to him Rs 2,600.
Journal entry
Purchases A/c | Dr. | 2,600 |
|
To Cash A/c | Dr. |
| 2,500 |
To Discount Received A/c |
|
| 100 |
(Bought goods and discount received) | |||