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How can we treat discount on purchase, received at the time of payment with negotiation ( e.g after 1 or 2 week )?

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Question added by Muhammad Tallah Rashid ACCA, UAECA , COST & FINANCIAL ANALYST , EMIRATES INTERNATIONAL RESTAURANTS (CHILIS’) LLC
Date Posted: 2016/02/03
Rehan Rehan Nasir
by Rehan Rehan Nasir , Junior Internal Audit officer , Chemicals & Dyes

It'll be discount on payment. Supplier Dr, Cash cr and discount cr

Muhammad Mujtaba Shafique
by Muhammad Mujtaba Shafique , RJ , Dream Fm106

If you buy $one thousand of products having a trade cut price of%, you can debit Purchases (periodic device) or stock (perpetual gadget) for $ and accounts Payable for $. That is constant with the cost principle which means the cash or cash equivalent quantity.

 

If the invoice allows a1% bargain for paying within days, you could file the1% cut price when you make payment inside the allotted time. The entry for paying within days might be: debit bills Payable $, credit score cash for $, and credit purchase discounts $eight (or stock $eight if perpetual).

 

If you are certain to always pay seller invoices within their cut price intervals, you could initially document the above bill at $ (instead of $). Debit Purchases or inventory for $ and credit score debts Payable $. While paying the bill inside the cut price period, the access might be a debit to money owed Payable for $ and a credit score to coins for $. If you fail to pay the invoice in the bargain period, the price will ought to be $ and could be recorded with a debit to debts Payable $, a debit to buy reductions misplaced $8, and a credit to cash for $. Buy reductions lost is an profits statement account.

Elyasali Ebrahim
by Elyasali Ebrahim , Cashier cum Data Entry and Staff Accountant , Al Rawabi group of companies

Supplier a/c Dr,

Cash/Bank a/c Cr

Discount received a/c Cr

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