Answer Posted / h.r. sreepada bhagi

It's important to know when the discount is given. Various
entries given below with example Original Price, Rs, 10000/-
& discount 10%.

1. When discount is mentioned in the Sales Invoice, there is
no need to recognise it separately as income (Discount
Received) as it is Trade Discount. The purchase entry is:-

Purchase A/c Dr. Rs.9000/-
Supplier's (Creditor) A/c Cr. Rs.9000/-

*** If it's an asset, Asset A/c shall be debited instead of
Purchases A/c.

However, if the discount of Rs. 1000/- is given at the time
of payment, then it's recognised as an Income, as it's
treated as Cash Discount. The purchase entry is:-

Purchase A/c Dr. Rs.10000/-
Supplier's (Creditor) A/c Cr. Rs.10000/-

The payment entry for settlement of credit purchase is :-

Supplier's (Creditor) A/c Dr. Rs.10000/-
Bank/Cash A/c Cr. Rs.9000/-
Discount Received A/c Cr. Rs.1000/-

Alternatively the supplier can be debited with Rs. 9000/-
through purchase entry & discount can be accounted by
debiting the supplier and crediting the Income A/c with Rs.
1000/-

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