Cash and Trade Discount Entry

Every company selling goods have to give discount at some point of time to the buyer of product of the company. There are two types of discounts while trade discount is given voluntarily to its customer by the company whereas cash discount is given to customers so that they make payment at the earliest, given below is the accounting treatment for cash and trade discount –

Trade discount entry

In accounting there is no journal entry passed for trade discount, because the price is already deducted from the selling price by the seller at the time of selling the goods. Since there is no journal entry there is no question of it appearing in trial balance or profit and loss account.

Cash discount entry

Since cash discount is an expense it is debited, so for example if customer A has bought goods worth $2000 and the company gives cash discount of 10 percent then accounting entry for such transaction will be –

Cash account Dr                 $1800

Discount account Dr          $200

                   To Customer A account                $2000

Hence as one can see from the above that cash discount appears on the debit side of profit and loss account and it reduces the profit of the company.

0 comments… add one

Leave a Comment


Related pages


marginal costing approachat par chequeswhat is autocratic leadership styleadvantages and disadvantages of decentralisationconsignor meaningconsignees definitionmateriality concept examplelaws of diminishing returnsadvantages of lifo methodthe advantages and disadvantages of globalisationdisadvantages of stockslaw of diminishing returns examplesdemerit of internetdisadvantage of vertical integrationdrawee drawerhow to calculate cash reserve ratiomateriality accounting principleadvantages and disadvantages of accounting rate of returnfloat definition financefull form of neftshukria definitionindirect currency quotecharacteristics of finance leaseplr sbidisadvantages of deficit financingslr crrdifference between a debtor and a creditorlimitations of absorption costingdebit card wikiwhat is the full form of crrexamples current liabilitiesfinance payback perioda2z maintenance & engineering servicesselling shares advantages and disadvantagesexplicit cost in economicshow to write bearer chequenondurable goods examplesbarter trading systemadvantages of process costing systemadvantages and disadvantages of payback periodmerits and demerits of capital budgetingcompetitive pricing advantages and disadvantagesmonopolistic competition market structuresaudit opinion unqualifiedtally full formadvantages and disadvantages of functional organisational structuredistinguish between tariff and non tariff barriersdefinition of centrally planned economyadvantages of specialization in economicsurbanization meaning in hindijournal entry for cash received in advanceadvantages and disadvantages of capital budgeting techniquesdifference between inferior and superior goodsprepaid expenses meaningproblems of barter systemjournal entry for credit salessemi finished goods examplesdifferent types of factoringrevaluation of assets journal entrydifference between trading account and demat accountunearned income accountingadvantages and disadvantages of short term sources of financeprocess costing disadvantagesaccounting concept going concerncertificates of deposits in indiadifference between cash credit and bank overdraftwhat is full form of slrfictitious assets examples wikipediaprepaid insurance journal entrybenefits of a command economyeconomics complements and substituteswhat is the lifo methodadvantages and disadvantages of swot analysisfactoring advantagesregular payback periodautocratic leadership pptadvantages and disadvantages of paybackmateriality in accountingadvantages of autocracy governmentwhat is indirect quotationadvantages and disadvantages of central governmentdisadvantages of hedge funds