Should the Cash Discounts GL hit the Balance Sheet as per US accounting concept? If yes, then why and if No, then why? Please explain the entry flow and also how you would clear the open item lying the Cash discounts GL and what would be your analyses for the open line item?

Questions by johnmathew986   answers by johnmathew986

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availraj2002

  • Aug 30th, 2007
 

I believe that cash discounts are taken into P&L and not to the B/S.

The journal would be :

Dr. Bank A/c                            90
Dr. Cash Discount given A/c    10
Cr. S. Drs                                          100

So it is taken into P&L and adjusted in the Net profit itself..

Hence, you add the Net profit with your capital in B/S.

So, net effect is given there.

Hope this is clear.

Gayathri Suresh Kumar

  • Sep 5th, 2007
 

Cash Discounting should done General Ledger not in Balance sheet

Entry should be

Bank a/c                                  dr
Cash Discounting a/c               dr
 To Sundry Debtors a/c

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