Discount on creditors

Please clear the query.... as it is not understandable.....

Hi Krishnamoorthy.

As per the basic accounting conservatism concept, all anticipated future losses needs to be accounted. However, incomes are accounted only when they are accrued or when there is a surety that the said income would be realized. In your case, discount received from creditors can be accounted only when the actual discount has been received from the creditor. Creating a reserve for discount on creditors does not hold good, thus violating the priciple of conservatism. Correct me if I am wrong.