Explain the terms: discount allowed and discount received. In accounting, how are they treated in the books of account?

Suggested Answer:

Discount allowed are given to the CUSTOMERS of a company so as to induce them who are owing money to settle in a time specified by the company.

It is treated as an expense on the Profit and Loss Account (Income Statement)

Discount received are given by the SUPPLIERS of a company to induce the company to settle in a time specified by the supplier.

It is treated as a credit to the Profit and Loss Account(Income Statement) hence increasing the net profit of the business.