All 25 Sales & Purchase Ledgers questions
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What is a contra between the sales and purchases ledgers (set-off)? How do you deal with a credit balance in the sales ledger? What is an aged receivables (debtors) analysis and why is it used? How is a refund to a customer or from a supplier recorded? How do you record goods taken by the owner from inventory (drawings in kind)? What is the difference between the memorandum ledger balance and the control account balance? How do you record interest charged to a slow-paying customer? How do you account for an irrecoverable (bad) debt in the sales ledger? How do you reconcile the sales ledger to the sales ledger control account? How do you handle a supplier statement reconciliation in the purchases ledger?
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Bookkeeping › Sales & Purchase Ledgers

How is an early-settlement discount received from a supplier recorded?

Intermediate

Answer

When the business pays a supplier early and takes a discount, debit the supplier's account with the payment and the discount received, and credit bank with the cash and discounts received with the discount. The discount received is income, reducing the effective cost of purchases.
Owe 600, pay 588 + 12 discount: Dr Supplier 600; Cr Bank 588; Cr Discounts Received 12.
Real-world example Paying a supplier within terms earns a discount received, credited as income when taken.

Common follow-ups: Is discount received income or expense? | Which account is credited for the discount?

Cash Book & Petty Cash Control Accounts Sales & Purchase Ledgers
All 25 Sales & Purchase Ledgers questions