News Cash As Well As Merchandise Discounts
Cash Discounts
“A cash discount is a reduction inward toll given to customers who pay their bills promptly, either past times cash, banking concern gibe or other means”.
Example
A client mightiness last given a 10 % discount if payment is made inside seven days.
The charge per unit of measurement of cash discount is usually stated equally a percentage. The menses inside the payment is to last made; these are all recorded on the sales documents (invoices).
Discount Allowed
Cash discounts are given to customers who pay their bills promptly.
Discount Received
Cash discounts received from suppliers who vantage prompt payment.
Note: cash discounts are recorded inward their ain ledger accounts.
Trade Discount
“A Trade Discount is a reduction inward the listing toll of goods, given to merchandise customers. This tin hand the axe last ii tiered, in that place mightiness last a toll for the full general populace as well as a 10% discount for traders who purchase inward bulk”.
There usually 3 types of customers:
1. Traders who purchase a lot of goods from you.
2. Traders who purchase alone a few items from you.
3. Direct to the full general public.
When recording credit sales, whatever merchandise discount is shown on the sales invoice.
Note: No double entry for Trade Discounts. These create non larn inward the accounts.
Things to remember
Cash discount is e'er shown inward double entry accounts.
Trade discount is never shown inward double entry accounts.