12th BOOK KEEPING BY AJAYSANTHOSH MOURYA
1.1.13 Provision for Discount on Debtors
To motivate the debtors to make prompt payments, cash discount may be allowed to them. After providing provision for bad and doubtful debts, the remaining debtors are called as good debtors. They may pay their dues in time and avail themselves of the cash discount permissable. So a provision for discount on good debtors at a certain percentage may have to be created.
Example: The Trial Balance as on 31st March 2004 shows the following:
Sundry debtors Rs. 45,000
Adjustment: Create 2% provision for discount on Debtors.
To motivate the debtors to make prompt payments, cash discount may be allowed to them. After providing provision for bad and doubtful debts, the remaining debtors are called as good debtors. They may pay their dues in time and avail themselves of the cash discount permissable. So a provision for discount on good debtors at a certain percentage may have to be created.
Example: The Trial Balance as on 31st March 2004 shows the following:
Sundry debtors Rs. 45,000
Adjustment: Create 2% provision for discount on Debtors.
Example: The trial balance shows on 31.03.2004,
Sundry debtors Rs. 85,000
Adjustments: Bad debts written off Rs. 5,000. Provide @ 5% provision for bad and doubtful debts and @ 2% provision for discount on debtors.
Sundry debtors Rs. 85,000
Adjustments: Bad debts written off Rs. 5,000. Provide @ 5% provision for bad and doubtful debts and @ 2% provision for discount on debtors.
Provision for discount on debtors will be shown
i) on the debit side of Profit and Loss account and
ii) on the asset side of the Balance sheet by way of deduction from Sundry debtors (after deducting bad debts written off and provision for bad and doubtful debts).
i) on the debit side of Profit and Loss account and
ii) on the asset side of the Balance sheet by way of deduction from Sundry debtors (after deducting bad debts written off and provision for bad and doubtful debts).
1.1.14 Provision for Discount on Creditors
Similar to cash discount allowed to debtors, the firm may have a chance to receive the cash discount from the creditors for prompt payment. Provision for discount on Creditors is calculated at a certain percentage on Sundry Creditors.
Example: The Trial balance for the year ended 31st March, 2004 shows
Similar to cash discount allowed to debtors, the firm may have a chance to receive the cash discount from the creditors for prompt payment. Provision for discount on Creditors is calculated at a certain percentage on Sundry Creditors.
Example: The Trial balance for the year ended 31st March, 2004 shows
Sundry Creditors Rs.50,000.
Adjustment:
Create a provision for discount on creditors @ 2%.
Adjustment:
Create a provision for discount on creditors @ 2%.
Provision for discount on creditors will be shown
i) on the credit side of Profit and Loss account and
ii) on the liabilities side of the Balance sheet by way of deduction from Sundry creditors.
i) on the credit side of Profit and Loss account and
ii) on the liabilities side of the Balance sheet by way of deduction from Sundry creditors.
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how is it treated in profit and loss account
ReplyDeleteAs a expense.
DeleteSir, Principle of conservatism will not apply on Provision for discount on creditors?? (So No effect) is it right or i am thinking wrong??
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ReplyDeletedoes it not affect the concept of prudence?
ReplyDeleteIf discount reserve on debtors is given in trial balance where its effect will come
ReplyDeleteThankyou
ReplyDeletemy question is discount received or provision for discount on creditor both are deducting from creditors in libility side of balance sheet or only provision for discount on creditor is deducting, help me regarding to this as well
ReplyDeleteprovide 5% reserve for discount on creditors it is given in adjustment how to treated in revaluation account
ReplyDeletePlease tell me, Where is posted in final account if Reserve for discount of Creditors given in Trail Balance
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ReplyDeleteCan u plz give all these examples in a complete,full numericls also with the adjustment of provision for bad debts
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Discount on creditors
ReplyDeleteOnly the % amount is considered in p/l a/c example 40000 debtors 5% bad debts means this 5 percent amount of debtors will be considered in pl account
ReplyDeleteDo you know what to do when reserve for discount on creditors is given in trial balance as well as adjustments
ReplyDeletethanks...it was very systematic and useful
ReplyDelete