Cash discounts received
Cash discounts received are settlement discounts obtained by a buyer for paying suppliers promptly. They reduce the purchase cost of the goods or services concerned; for inventory, purchase cost is measured net of relevant discounts. Traditional bookkeeping may use a discounts-received account before presenting the amounts appropriately. The payment and discount together clear the supplier balance.
Worked example
A buyer settles a $2,000 payable by paying $1,960 and receiving a $40 settlement discount; the payable decreases by $2,000.
Common mistake
Do not assume every discount received is unrelated finance income: consider what was purchased and the appropriate cost adjustment.
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 |