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Hello sir, I want to ask that we make memorandum columns of Discount Allowed and Received on cashbook. We also make their “T-Accounts” in General Ledgers. So why we call them memorandum accounts as we make double entries (ledger system). We are debiting Discount Allowed T-Account , so definitely, any column in general ledger would be credited for say RLCA.
Please help me with that. I could not explain my query very well sorry for that.Say a customer owed you 1000 with a 5% discount for prompt payment.
You receive 950. You check the date of the receipt and see that the discount taken is valid.
Cash must be debited 950 (that was what was received) and you can credit the customer 950. However, how are you going to record that they have been ‘let off’ the remaining 50? Solution – enter 50 in the memorandum account in the cash book. Credit 50 to the customer (no balance left now on that account), add up the memorandum column and debit that to discounts allowed in the nominal ledger.
Hello Mr John,
Do we have Discount Recieved or Discount Allowed control accounts?
No – these are not normal. However any settlement discounts received and allowed have to be recognised in the appropriate receivables or payables account and ALSO in the receivables control account and payables control account otherwise the sum of the lists of balances would not reconcile to the control account balances
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