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Ledger name for discount given

vinayak c. chavan (CPT passed) (1011 Points)

04 April 2013

We are Pvt ltd co.. We are giving discount (not in cash but in form of credit note against invoice genereated)to our customer who are making payment to us withing 2-3 days from the date of delivery of product. In previous year we are using ledger as cash discount for this transaction. What could be ideal name for the ledger for this type of transactions. Will "prompt payment discount" will be suitable name for this type discount from accounting point of view?

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5 Replies

pahuja (C.A Final Student ) (472 Points)
Replied 04 April 2013

HI vinayak

The idle name would be Discout Allowed.

Thanks & Regards

Suraj Pahuja

pahujasuraj & associates

Aman Sharma (Student CA Final ) (73 Points)
Replied 04 April 2013

An account is not a proper presentation for this types of discount. A discount a/c is generally involved when a company introduces specila discounts say 5% discount for 1 month etc.

Since you receive payments 2-3 days later its advisable to just reverse the entry as credit note or correct the original entry if u still wish to maintain an account.

rajendra (senior accountant) (50 Points)
Replied 05 April 2013

most suitable name will be discount allowed.

parag_0302 (Asstt. Commercial Officer) (124 Points)
Replied 19 April 2013

most suitable name is "cash discount" which is presently used by u because "discount allowed" is includes trade discount also and u r giving cash discount only, so in my view maintain two seprate a/c for trade discount (if any) or cash discount.

Because at the time of audit u can easily explain both the ledgers to your auditor.