What is the entry for Discount Received? & What is the
entry for discount paid?
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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)
Is This Answer Correct ? | 6 Yes | 7 No |
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.
Is This Answer Correct ? | 4 Yes | 6 No |
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
Is This Answer Correct ? | 42 Yes | 103 No |
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1. During the current period, ABC Ltd sold 60,000 units of product at Rs. 30 per unit. At the beginning for the period, there were 10,000 units in inventory and ABC Ltd manufactured 50,000 units during the period. The manufacturing costs and selling and administrative expenses were as follows: Total cost Number of units Unit cost Rs. Rs. Beginning inventory: Direct materials 67,000 10,000 6.70 Direct labour 1,55,000 10,000 15.50 Variable factory overhead 18,000 10,000 1.80 Fixed factory overhead 20,000 10,000 2.00 Total 2,60,000 26.00 Current period costs: Direct materials 3,50,000 50,000 7.00 Direct labour 8,10,000 50,000 16.20 Variable factory overhead 90,000 50,000 1.80 Fixed factory overhead 1,00,000 50,000 2.00 Total 13,50,000 27.00 Selling and administrative expenses: Variable 65,000 Fixed 45,000 Total 1,10,000 Instructions: 1. Prepare an income statement based on the variable costing concept. 2. Prepare an income statement based on the absorption costing concept. 3. Give the reason for the difference in the amount of income from operations in 1 and 2.
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