Different Types of Discounts - Purchase and Sales

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Different Types of Discounts - Purchase and Sales What is Discount? A Reduction in Price of goods is called Discount Example A sells goods to B for Rs 1000 @ 20% discount So How much will B Pay A Answer: Original Price = Rs 1000 Discount = 1000*20% = 200 Amount to be Paid = 1000 - 200 = 800 What is Discount Received and Discount Given Discount is Given on Sales Discount is Received on Purchase Example Suppose A Sells goods to B for 1000 at 200 Discount Sales 1000 - 200 Discount A B Amount Received Rs 800 For A For B it is Discount it is Discount Given Received (Expense) (Income) Different Types of Discount Trade Discount It is reduction in Price of goods at the time of sale It is not shown separately in the books of account. Example During clearance sale, Clothes showroom offers upto 50% discount on goods Suppose my company sells goods of Rs 10000@50% discount,We will show sale of Rs 5000 in our books of account Cash Discount It is reduction in Price of goods for timely payment Example P sells goods to Q for Rs 10000 on Credit If Q makes payment to P within 10 days, P will give 2% discount If Q makes payment late,then no discount Rebate It is reduction in price offered for reasons other than trade discount,cash discount Example Reduction in Price due to Faulty goods A reastaurant delivered food to customer for Rs 500 Customer was not satisfied with quality of food So Restaurant offered him Rs 200 discount This is an example of Rebate Summary Trade Discount Cash Discount Rebate Discount at time Discount at time Discount for of Sale of Payment Other Reasons Example Example Example Discount during If Payment Made Price Reduced Shopping Sale in 10 days due to at Clothes Showroom then Fault in goods 25%Discount /service