Cash Discounts

Understanding On Cash Discounts and Why Discount Given
1. Cash discount is a deduction from the net amount in the invoice if payment is made within the prescribed discount period.
2. Cash discount is given to encourage customers to pay their debts immediately. Cash discount is given for a short credit period.
3. Cash discount is a credit term and is usually stated in the invoice. The discount is expressed in percentage (%) if the debt is settled within a certain period. For example 5% 14 days, 2% 30 days and so on.

Cash Discount Note
1. There are two types of cash discount, namely:
a) Discounts are given
b) Discount received
2. Discounted discount is the cash discount given to the debtor who settled their debts within the required credit period. Its useful note is

Discounted Debit Account (Business expenses)
Credit Accounts Receivable (Reducing debt)

3. Discount received is the cash discount received from the creditors if the businessman meets the creditors’ credit terms. Its useful notes are:

Debit Accounts Credit (Reducing business debt)
Discounted Received Credit (Business Revenue)