Treatment of discount given on sale of gift vouchers

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Gambheer Singh (Querist)
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01 September 2016 Dear Experts
If a retailer sale the gift voucher for Rs. 2000/- and give discount for Rs. 500/- on gift voucher sale. Now the customer buy the product of the company for Rs. 2000/- and make the payment through above voucher. Now which one of following is correct. 1) Sale of Product 2000 - Less gift voucher discount Rs. 500/- = Net Product sale Rs. 1500/- or 2) Sale be Rs. 2000/- and Rs. 500/- Discount of Gift Voucher be expense out.

IS ANY EXPERT ABLE TO REPLY TO MY QUERY????????

Gambheer Singh

Gambheer Singh (Querist)
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12 September 2016 Dear Experts

Requested to reply to my query.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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02 August 2025 Great question! Here’s how the treatment generally works for **discount given on sale of gift vouchers**:

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### Scenario Recap:

* Gift voucher sold for Rs. 2000.
* Rs. 500 discount given on sale of the voucher.
* Customer redeems voucher to buy product worth Rs. 2000.

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### Accounting/Treatment Options:

#### 1) **Treat Sale of Product net of discount (Rs. 1500)**

* Product Sale = Rs. 2000
* Less Discount on Voucher = Rs. 500
* Net Sale recorded = Rs. 1500
* The Rs. 500 discount is effectively reducing the revenue from the product sale.

**This method treats the discount as a reduction in revenue.**

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#### 2) **Treat Sale as Rs. 2000 and Discount Rs. 500 as an expense**

* Product Sale = Rs. 2000
* Discount on voucher Rs. 500 recorded separately as a **marketing/sales expense** or "Discount allowed" expense.

**This method shows gross revenue from sale and separately recognizes discount as expense.**

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### Which one is correct?

* **Generally accepted practice and IFRS/GAAP principles favor showing sales net of discounts.**

* So, option **(1) Sale of product = Rs. 2000 less Rs. 500 discount = Rs. 1500 net sale** is preferable.

* This avoids inflating revenue and then separately showing discount expense, giving a clearer view of actual revenue.

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### Why?

* The discount is a reduction of the transaction price.
* Revenue is recognized at the amount the entity expects to receive.
* Showing gross sales + discount expense can overstate revenue.

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### Summary:

* Record product sale at Rs. 1500 (net of voucher discount).
* The Rs. 500 discount reduces revenue, **not recorded as an expense separately**.

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If you want, I can help draft the journal entries for this treatment. Want me to?

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