Treatment of discount

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Amit Agarwal (Querist)
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30 June 2013 Dear Experts,

A public limited company has come up with a 6 years Discount scheme for selling his product and increasing sales under which:

1. In the first year if a customer buys Rs. 75000 product then he is getting a Discount Coupon of full amount of Rs. 75000 which is redeemable in 6 years.

2. The scheme is - if customer comes after 1 year from the date of purchasing and surrendering the Discount coupon then he is getting product worth 10% of the Purchased amount.
But if he comes in the 2nd year then 20% and so on. In the 6th Year he is getting product worth 100% of the purchased amount.

Customer can surrender only 1 time and it is upon him when he is going to surrender his discount coupon. If the customer is not appearing in the 6th year then his coupon will lapse, so anyhow the customer will have to surrender in 6th year.

Question:

1. When we are going to treat this Discount, at the time of purchase? If the answer is yes then there will be huge loss in the books? If the answer is NO then there will be huge profit at the time of Sale. Please advice?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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30 June 2013 The scheme is not becoming clear.
.
Please specify the amount of discount in terms of Rs. also so that the terms "Purchase Amount", "Purchased Amount", "Purchasing" etc. could be clearer to the experts. Continue the same example of Rs 75000 in the discount scheme also.

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