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What is the difference between discount received and discount allowed?

What is the difference between discount received and discount allowed?
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    1. B.com and Pursuing ACCA
      This answer was edited.

      Discount received is the reduction in the price of the goods and services which is received by the buyer from the seller. It is an income for the buyer and is credited to the discount received account and credited to the seller/supplier’s account.

      Journal entry for discount received as per modern rules:

      Creditor’s A/c Debit Decrease in liability
              To Cash A/c Credit Decrease in asset
              To Discount Received A/c Credit Increase in income
      (Being goods purchased and discount received)

      Discount allowed is the reduction in the price of the goods which is granted by the seller to the buyer on prompt payment of their account. It is an expense for the seller and is debited to the discount allowed account and credited to the buyer’s account.

      Journal entry for discount allowed as per modern rules:

      Cash A/c Debit Increase in asset
      Discount Allowed A/c Debit Increase in expense
          To Debtor’s A/c Credit Decrease in asset
      (Being goods sold and discount allowed)

      For example, A Ltd. offers a 10% discount to the customers who settle their debts within two weeks. Mr.B a customer purchased goods worth Rs.20,000.

      According to modern rules, A Ltd will record this sale as:

      Particulars Amt Amt
      Cash A/c                                    Dr. 8,000
      Discount Allowed A/c             Dr. 2,000
                  To Mr.B’s A/c 10,000

       

      Mr.B will record this purchase as:

      Particulars Amt Amt
      A Ltd A/c                                    Dr. 10,000
         To Cash A/c 8,000
         To Discount Received A/c 2,000

      For a business, the discount received is an income, and the discount allowed is an expense. In the above example, A Ltd has granted a discount and B is the receiver of the discount. Hence, for A Ltd discount allowed is an expense and for B discount received is an income.

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