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Accounts Payable DR
Cash Cr
Purchase discounts Cr
Dr. acc. payable $$
Cr. Cash $$
Cr. purchase discount $$
Debit AP
Credit Purchase Discount
Credit Cash
purchase............... debit
purchase discount .......... credit
Vendor account Dr
To. Cash
To . Purchase discount
Is the amount that the seller buys from goods for the purpose of selling them per day
Technically Two treatments:
1- If purchase on Credit:
Purchase Account - Dr.
Vendor Account - Cr.
Discount on Purchase Account - Cr.
2- If purchase on Cash:
Purchase Account - Dr.
Cash/Bank Account - Cr.
(In this case we will record purchase with actual amount paid after receive discount and then no need to mention discount)
Note: Some persons record discount in both situations, in cash and in credit. It's depend upon you that what you want to do.
Purchases with Discount (gross)Illustrative Entry
Entry to record initial purchase (gross):
11-5-X7Purchases
5,000
Accounts Payable5,000
Purchased inventory on account, terms 2/10,n/30Entry to record payment within the discount period:
11-13-X7Accounts Payable
5,000
Purchase Discounts100
Cash4,900
Paid outstanding payable within discount period, 2% discount taken ($5,000 X 2% = $100)OR
Entry to record payment outside of the discount period:
11-29-X7Accounts Payable
5,000
Cash5,000
Paid outstanding payable outside of the discount period XX-XX-XXPurchases
3,000
Accounts Payable3,000
Purchased inventory on account
Suppliers A/c/ Accounts Payable Dr.
To Discount on Purchase/ Discount Received
(Being Discount Received on Purchase of Goods/Services)
purchase Dr
To Cash/ BAnk
To Purchase Discount
