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

 

 

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)

 

 

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if we receive discount from a person than it will be credited 
for eg. we have to pay 1000 ti X n he allowed us discount of rupees 200 than the entry goes like :-

X ac                                      DR                        1000

        to cash                                                                    800

        to discount received                                             200

 

n if we allow discount that means we are allowing thm some discount for early payment or buying in bulk ect. n entry goes like :-)

cash ac                                          Dr    800

discount aalowed ac                  Dr      200

                                To X /debtor's a/c                       1000

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if we gave the discount then it will be debited  becz  it is an expense
if we are getting the discount then it will be credited  becz it is profit

For journal entries , just remeber these rules
DEBIT ALL EXPENSES  ,   DEBIT THE RECEIVER ,  DEBIT WHAT COMES IN   
CREDIT ALL GAINS & PROFITS  ,  CREDIT THE GIVER  , CREDIT WHAT GOES OUT

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