Before passing Journal Entry for Discount Received, we have to know about the meaning of discount and its type.
The Meaning of Discount Received:
The Discount Received means the purchase of goods less than its selling price.So, it is the gain of the buyer of the goods according to Nominal rule he will credit the discount Received A/c.
For Example, the Purchase price of the product is Rs 1,500/- but Retailer offers us only for Rs.1,350/- after deducting 10% discount. here the amount of discount received is Rs 150/-.
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Journal Entry for Discount Received :
Now, We will discuss the Journal Entry for Discount Received in three different cases shown as following: –
1. Discount received and the net amount paid or total amount payable is given:
Example No. 1:
05/02/2018 Amount paid to Mr A of Rs 900/- and he allowed a discount of Rs 100/-.
Or
Example No. 2:
05/02/2018 The amount payable to Mr A of Rs 1,000/- and he allowed a discount of Rs 100/-.
Both Journal Entry for Discount Received are same and treated as the following:
2. The Percentage of discount received and the total amount payable is given:
Example No. 3:
05/02/2018 The amount payable to Mr A of Rs 1,000/- and he allowed a discount @ 10%.
In this transaction, you have to calculate discount first as the following:
1000*10/100 = 100/-
Journal Entry remains same as above.
3. The percentage of discount received and the total amount paid is given:
Example No. 4:
05/02/2018 Amount paid to Mr A of Rs 900/- and he allowed a discount @ 10%.
In This transaction, you also have to calculate the amount discount first as the following:
if the amount paid is given then we have to use the following formula to calculate the amount of discount same as we calculate discount allowed in the previous topic.
Percentage of Discount/100 – Percentage Rate of Discount (we will show you it in Image below)
Discount Received calculationJournal Entry remains same as above.