Source document for Cash discount
This query is : Resolved
Quick Summary
30 January 2024
In case of cash discount given to a buyer, the seller will record Discount Allowed as an expense in Profit and loss account. Which document will be issued to the buyer showing the amount of discount allowed to him?
31 January 2024
A credit note will suffice
31 January 2024
thanks for your response
Credit Note will Dr. Sales A/c and Cr. Debtor A/c then how discount would appear in Discount allowed A/c?
Credit Note will Dr. Sales A/c and Cr. Debtor A/c then how discount would appear in Discount allowed A/c?
31 January 2024
It's can't be debit in sales account. It will separately account as Discount Paid...
17 August 2025
A Credit Note is the correct source document to issue when a cash discount is allowed post-invoice. It captures the reduction in sales and accounts for it properly—as an expense in your Profit & Loss (Sales Discounts) and accounts receivable adjustment.
Why Credit Note?
It formalizes the discount and enables correct accounting entries.
It can adjust your GST liability—provided the discount was agreed upon beforehand (e.g., via PO or contract). Without documented terms, GST may still apply.
In short:
Journal Entries
Debit: Sales Discounts (contra-revenue)
Credit: Debtor / Accounts Receivable
Document
Issue a Credit Note referencing the original invoice and stating the discount amount.
This ensures both accounting accuracy and GST compliance. Happy to assist further if you’d like to format a sample credit note template!
Why Credit Note?
It formalizes the discount and enables correct accounting entries.
It can adjust your GST liability—provided the discount was agreed upon beforehand (e.g., via PO or contract). Without documented terms, GST may still apply.
In short:
Journal Entries
Debit: Sales Discounts (contra-revenue)
Credit: Debtor / Accounts Receivable
Document
Issue a Credit Note referencing the original invoice and stating the discount amount.
This ensures both accounting accuracy and GST compliance. Happy to assist further if you’d like to format a sample credit note template!
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