What is the Difference Between Discount Allowed and Discount Received?
🆚 Go to Comparative Table 🆚The difference between discount allowed and discount received lies in the perspective of the parties involved in the transaction.
- Discount Allowed: This is when a seller grants a payment discount to a buyer. It can be for various reasons, such as early payment incentives, volume purchase, or sales promotions. From the seller's perspective, discounts allowed are considered an expense.
- Discount Received: This is when a buyer is granted a discount by the seller. It can be for the same reasons as discount allowed, such as early payment, volume purchase, or sales promotions. From the buyer's perspective, discounts received are considered income or a reduction in their cost.
In summary:
- Discount allowed is granted by the seller to the buyer and is considered an expense for the seller.
- Discount received is obtained by the buyer from the seller and is considered income or a reduction in cost for the buyer.
On this pageWhat is the Difference Between Discount Allowed and Discount Received? Comparative Table: Discount Allowed vs Discount Received
Comparative Table: Discount Allowed vs Discount Received
Here is a table comparing the difference between discount allowed and discount received:
| Feature | Discount Allowed | Discount Received |
|---|---|---|
| Definition | A reduction in the price of goods or services allowed by a seller to a buyer. | A reduction in the price received by the buyer of goods and services from the seller. |
| Perspective | Seller's perspective. | Buyer's perspective. |
| Recording | Recorded as a reduction of revenues, typically a debit to a contra revenue account. | Recorded as a reduction in the expense (or asset). |
| Impact on Cash Flow | Can improve cash flow for the seller by encouraging timely payment. | Can reduce costs and improve the bottom line for the buyer. |
| Examples | Discount for early payment, volume purchase, or sales promotion. | Reduction in purchase price to negotiate better prices from suppliers. |
In summary, discount allowed is a reduction in the price of goods or services granted by the seller to the buyer, while discount received is a reduction in the price paid by the buyer to the seller. The discount allowed is considered an expense for the seller, whereas the discount received is considered income for the buyer or a reduction in their costs.
Read more:
- Rebate vs Discount
- Trade Discount vs Cash Discount
- Trade Discount vs Settlement Discount
- Discount Rate vs Interest Rate
- Factoring vs Invoice Discounting
- Discounted vs Undiscounted Cash Flows
- Receipt vs Invoice
- Factoring vs Bill Discounting
- Payback Period vs Discounted Payback Period
- Refund vs Rebate
- Permitted vs Granted
- Accounts Payable vs Accounts Receivable
- Debit vs Credit
- Debit Balance vs Credit Balance
- Accounts Receivable vs Notes Receivable
- Direct Write Off Method vs Allowance Method
- Credit Sales vs Accounts Receivable
- Account Balance vs Available Balance
- Tolerance vs Allowance