Discount journal entry

nagamani Registered Posts: 1
guys can you pls tell me the reason why sundry creditor is shown to the debit when we receive discount from him???
eg: abc A/c dr ***
to discount received A/c cr*** ( nominal a/c , income)


  • CeeJaySix
    CeeJaySix Registered Posts: 645
    Initially you buy something at full price, say £10.

    Ignoring VAT:
    Debit purchases, credit Trade Creditors.

    However then we get a 20% discount of £2:
    Debit Trade Creditors, Credit Discounts Received.

    Therefore you end up with the correct discounted balance of £8 on Trade Creditors.

    In the financial statements, discounts received will be netted off purchases under cost of sales, to leave the figure paid for the item of £8.
Privacy Policy