DiscountDiscountCashDiscountCommercialDiscountAdeductionfromtheCertain sum ofgross invoice value thatmoney that is allowedcanbetaken onlyif thetobe deducted frominvoiceispaidwithinacommodity pricesspecified periodof time toencourageearlypayment62025/12/3
6 2025/12/3 Commercial Discount Discount ⚫ Certain sum of money that is allowed to be deducted from commodity prices. Discount Cash Discount ⚫ A deduction from the gross invoice value that can be taken only if the invoice is paid within a specified period of time to encourage early payment
CommercialDiscount It is usually expressed as a percentage, such as5%,10%,etcIt does not affect the entry value of accountsreceivable but isonly consideredtheadjustmentof prices.2025/12/3
7 2025/12/3 Commercial Discount ⚫ It is usually expressed as a percentage, such as 5%,10%,etc. ⚫ It does not affect the entry value of accounts receivable but is only considered the adjustment of prices
CashDiscountItnormallyappearsas"2/10,1/20,n/30"ontheinvoice2/10 means a discount of 2%of thegross invoicepriceisdeductible forpaymentswithin10days;1/20means1%deductibleforpaymentswithin20days;n/30meansthatnodiscount if thepaymentisafter30daysfollowingtheinvoicing date.82025/12/3
8 2025/12/3 Cash Discount It normally appears as “2/10,1/20,n/30” on the invoice. ⚫ 2/10 means a discount of 2% of the gross invoice price is deductible for payments within 10 days; ⚫ 1/20 means 1% deductible for payments within 20 days; ⚫ n/30 means that no discount if the payment is after 30 days following the invoicing date
CashDiscountWhentransactionoccurredDr.AccountsReceivableCr.Sales RevenueWhenthepaymentisreceived andthecashdiscountisrealizedDr.CashSales DiscountCr.AccountsReceivable92025/12/3
9 2025/12/3 Cash Discount ⚫ Dr. Accounts Receivable Cr. Sales Revenue When transaction occurred ⚫ Dr. Cash Sales Discount Cr. Accounts Receivable When the payment is received and the cash discount is realized
Example---- Cash DiscountOnJune1,K15soldmerchandiseof$50.000toSpeed5oncredit.Thecredittermwas2/10.1/20.n/30.andSpeed5paidthemoneyonJune18 June 150,000Dr.AccountsReceivable-Speed550,000Cr.SalesRevenue June 18Dr.Cash49,500500SalesDiscount50,000Cr.Accounts.Receivable-Speed5102025/12/3
10 2025/12/3 Example - Cash Discount ⚫ On June 1, K15 sold merchandise of $50,000 to Speed 5 on credit. The credit term was 2/10,1/20,n/30, and Speed 5 paid the money on June 18. ⚫ June 1 Dr. Accounts Receivable-Speed 5 50,000 Cr. Sales Revenue 50,000 ⚫ June 18 Dr. Cash 49,500 Sales Discount 500 Cr. Accounts Receivable-Speed 5 50,000