Discounts Allowed
<p>Cash Discount
 
A Discount Allowed is recorded when the full sale is recorded but the customer is allowed to pay off less than the full value of the invoice for some reason such as early payment (method to improve cashflow) or finding of a fault or a volume purchase.
 
Ledger transactions - 
 
 
 
1st transation - Date N0
Cr Sales
Dr Accounts Receivable
To record a sale 
 
2nd transaction - Date N1 (Some future date)
Dr Bank
Dr Discounts Allowed
Cr Accounts Receivable
To record the collection of proceeds where the proceeds are less than the original sale because of a discount given
 
Note that Discounts Allowed are an Indirect Cost since there is typically no relationship between turnover and the allowance of these types of discounts.
 
Discount Allowed at the time of collection of Cheque/deposit <br />
from the Customer / Debtors (some / specified % on amount <br />
of outstanding has been reduced from the collectable <br />
amount) is a Indirect Expense.<br />
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