Cash discounts allowed
Cash discounts allowed are settlement discounts granted by a seller to customers who pay within the stated period. Under IFRS 15, expected discounts are considered when measuring the transaction price, with later revisions affecting revenue. In basic bookkeeping questions a discounts-allowed account may be used to process the adjustment. Keep the commercial discount and the receipt that settles the receivable distinct.
Worked example
A $1,000 customer balance is settled by a $980 receipt with an agreed $20 discount: remove the full $1,000 receivable.
Common mistake
Do not leave the discounted amount as an irrecoverable debt; the seller has agreed to accept less under the payment terms.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |