Answer / radhu

discount received is a gain of a party so it will be
credit and discount paid is a loss so it will be debited.
entry:-
discount received:-
cash a/c dr.***
to party's a/c ***
to discount received a/c ***
(being discount received)

discount paid:-

pary's a/c dr. ***
discount allowed a/c dr. ***
To party's a/c ***

(being discount allowed)

Answer / h.r. sreepada bhagi

As mentioned above Discount received is income & discount
allowed is an expense.

Entries depends up on substance and timing of recognition of
the income or expense. Assuming that Discounts received or
allowed are cash discounts and not trade discounts the
entries are (Eg. Rs. 1000/- is the discount received or
allowed) :-

For Discount Received:-
On recognition of Income before settlement by cash/bank
Creditor's (Vendor) A/c Debit - Rs.1000/-
Discount Received A/c Credit - Rs.1000/-

Generally, the amount will be deducted from the payables and
no separate entry for receipt will be there. However if the
bill amount has been fully paid earlier and the payee has
reimbursed the discount amount in cash or by cheque, the
entry will be :-

Bank/Cash A/c Debit - Rs.1000/-
Creditor's (Vendor) A/c Credit - Rs.1000/-

In case the discount income is recognised on receipt by
cash/Cheque/DD/Credit to a/c, as it was not known or not
recognised earlier for any reason, then the entry will be :-

Bank/Cash A/c Debit - Rs.1000/-
Discount Received A/c Credit - Rs.1000/-

For Discount Allowed:-
On recognition before settlement by cash/Cheque/DD, etc.
Discount Allowed A/c Debit - Rs.1000/-
Debtor's (Customer) A/c Credit - Rs.1000/-

As above, generally, the amount willb e deducted by teh
customer from the bills & hence seperate bank or cash entry
will not be required. However if the bill amount has been
fully received earlier and the company has reimbursed the
discount amount in cash or by cheque/DD, the entry will be :-
Debtor's (Customer) A/c Debit - Rs.1000/-
Bank/Cash A/c Credit - Rs.1000/-

In case the discount expense is recognised on payment by
cash/Cheque/DD/transfer from a/c, as it was not known or not
recognised earlier for any reason, then the entry will be :-
Discount Allowed A/c Debit - Rs.1000/-
Bank/Cash A/c Credit - Rs.1000/-

Different accounting treatment shall be made for trade
discounts. Specific entry depends up on the circumstance,
materiality and substance of the transaction. When these are
accounted while settling the bill, then a consolidated
transaction entry can be made and the income or expense be
accounted along with giving effect to Cash/Bank &
Creditor/Debtor.

Answer / pradeep kumar

WHEN DISCOUNT RECIEVED
BANK/CASH A/C DR.
DISCOUNT A/C DR.
TO PARTY A/C


DISCOUNT PAID

PARTY A/C DR.
TO CASH/BANK
TO DISCOUNT A/C

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