What is discount allow & discount receive

*Discount Allowed

*There is discount allowed when the seller of goods or services gives a discount to the buyer upon payment. 

*Sellers commonly give price reductions as incentives to encourage early payment on credit sales.

*Sellers also allow discounts for other reasons, such as cash up-front payments, volume orders, promotional offers, clearance sales and as a loyalty reward. 

*Sales discounts is the account title used by sellers to record discounts allowed, and this account does not appear on the balance sheet.

*Accounting for Discounts Allowed

*You should record discounts allowed to buyers upon payment as a deduction to revenues in the income statement. 

*.Discounts allowed are not reflected in the balance sheet.

☆Discount allow reduces profit as expense  increase.

*Discount Received

*Discount received refers to the discount recorded by the buyer upon payment of goods or services bought on credit. 

*Sellers normally offer discounts for a number of reasons, but most of them use discounts as an incentive to encourage buyers to pay earlier. 

*Buyers often try to take advantage of these discounts if they can afford to to save cash.

Accounting for Discount Received

*Purchase discounts is the account title you use when referring to discounts received for goods purchased. T

*his account appears as a reduction in purchases in the income statement and has a net effect of reducing the amount of purchases, which increases the net income of the business. 

*Discounts received are not reflected in the balance sheet.

☆Discount received increase  income as liability decrease

*The differences between trade discounts and cash/settlement discounts are as follows:

Trade discount	Cash discount
1. A reduction in the selling price of a commodity set by seller. 2. Allowed or given for bulk purchase 3. Not recorded in the books/ accounts	1. A reduction in the amount owed by a debtor. 2. Allowed for prompt/ quick payment 3. Recorded in the books

 Note:Discount allowed is the discount on sales and discount received is discount on purchases