Nature of Discount

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zamir (Querist)
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05 December 2009 Dear Expert,
the company is getting price protection say 1 week, i.e The company will purchase as per price list and if price falls in market within 1 week then company will get the above discount.
I want to know the accounting treatment of discount and nature of above discount, whether it is a cash discount or trade discount.

Thanking You
Z A M I R

Kishanlal Paliwal

Kishanlal Paliwal (Expert)
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07 December 2009 The nature of the 'price protection discount' is trade discount since the motive of the said discount to encourage the trading.

As far as the treatment of accounting is concerned you have to pass the entry by giving suitable heading in Trading Account under "Goods Purchase" group.

Regards