Discount accounting

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Ankit (Querist)
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18 January 2010 While purchasing goods sometimes supplier give Cash discount whether fixed or on a certain percentage basis

My query is what is proper treatment
E.g. Purchase - Rs 100/-
Discount - Rs 10/-
Net Payment-Rs 90/-

Option 1) Debiting purchase by Rs100/- & open a separate a/c "Discount" & crediting Rs10/-

Option2) Debiting purchase by Rs90/- ?

Is the treament changes if discount received is
1) recurring/regular basis
2) non-recurring?

Thanks

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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18 January 2010 If it is a trading discount, entry will be

Pur Dr 90
to Bank Cr 90

If other discount

The entry mentioned by you

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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18 January 2010 ACCOUNTING PRINCIPLE REGARDING CASH DISCOUNT :

Always treat it separately.

ANALYSIS OF CASH DISCOUNT :

It shows the cash richness of the firm when shown separately.

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