Discount Received
What is Discount Received?
A discount received is a discount received by a customer who has bought goods.
![dr1](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr1.jpg)
How it Works
A business may buy goods on credit.
![dr2](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr2.jpg)
This means the business can pay for the goods later.
![dr3](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr3.jpg)
To encourage early payment, the seller may offer a discount for paying early.
![dr4](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr4.jpg)
If the business takes up the offer, they will pay the purchase price less the discount amount.
![dr5](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr5.jpg)
Recording the Initial Transaction
Despite the discount offer, the business may not pay for the goods earlier than the due date.
![dr6](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr6.jpg)
Because of this, you record the purchase’s full value when the purchase is made.
![dr7](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr7.jpg)
To record the purchase, you credit the supplier’s account
![dr8](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr8.jpg)
This shows the goods came from the supplier.
![dr9](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr9.jpg)
After this, you debit the purchases account.
![dr10](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr10.jpg)
This shows the goods were used for purchases.
![dr11](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr11.jpg)
Recording the Discount
In the end, the business may opt to pay ahead of time.
![dr12](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr12.jpg)
This will entitle them to a discount.
![dr13](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr13.jpg)
When the business pays, it will pay what they owe net of the discount.
![dr14](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr14.jpg)
To record the transaction, you credit the checking account.
![dr15](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr15.jpg)
This shows money came from the bank.
![dr16](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr16.jpg)
After this, you debit the supplier’s account.
![dr17](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr17.jpg)
This shows the money went to the supplier.
![dr18](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr18.jpg)
Next, you need to account for the discount.
![dr19](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr19.jpg)
Here, you credit the discount received account.
![dr20](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr20.jpg)
This shows that the value has come from the discount.
![dr21](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr21.jpg)
Then you debit the suppliers account.
![dr22](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr22.jpg)
This shows the value was used to make up the difference of the balance owing.
![dr23](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr23.jpg)
The discount received account is a contra expense account.
![dr24](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr24.jpg)
In other words, it is classified as a expense account.
![dr25](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr25.jpg)
But because it balances on the credit side, it is said to be contra account.
![dr26](https://seeaccountingnow.online/wp-content/uploads/2021/07/dr26.jpg)
© R.J. Hickman 2021