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Hi Mike,
Could you please explain for me why cash discount should be treated as expense (in seller) or income financial (in buyer) ?thank you very much
When we entered the sale in the seller’s records, we debited Receivables and Credited Revenue
But we didn’t receive the full amount from the Receivables, we only received an amount net of a cash discount
Let’s play with some figures
The sale was for $1,000 and the cash discount is $50
Dr Receivables $1,000
Cr Revenue $1,000Dr Cash $950
Cr Receivables $950Dr Discount expense $50
Cr Receivables $50OK?
I want to check again :
It mean when we buy good if there is a cash discount,we need a period time to know whether customer payment in early to get cash discount. So we don’t deduct this amount in receivable until customer payment , that why cash discount is finance expense?
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