Journal Entry for Sales Discount
A sales discount, also known as a cash discount, is offered by a seller to a buyer for early payment of an invoice. When a sales discount is given, it needs to be recorded in the accounting books. Here's an example of how to record a sales discount:
Scenario:
A company sold goods worth ₹50,000 on credit with payment terms of 2/10, net 30. This means the buyer gets a 2% discount if the invoice is paid within 10 days. The buyer pays within the discount period, taking advantage of the 2% discount.
1. Recording the Sale on Credit
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-01 | Accounts Receivable A/c | 50,000 | |
| To Sales Revenue A/c | 50,000 | ||
| (Being goods sold on credit) |
2. Recording the Payment Received with Discount
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-10 | Cash/Bank A/c | 49,000 | |
| Sales Discount A/c | 1,000 | ||
| To Accounts Receivable A/c | 50,000 | ||
| (Being payment received with a 2% discount) |
Explanation:
Recording the Sale on Credit:
- Accounts Receivable A/c is debited to reflect the amount owed by the customer.
- Sales Revenue A/c is credited to recognize the revenue from the sale.
Recording the Payment Received with Discount:
- Cash/Bank A/c is debited to record the actual cash received (₹49,000).
- Sales Discount A/c is debited to record the discount given to the customer (₹1,000).
- Accounts Receivable A/c is credited to clear the amount owed by the customer (₹50,000).
