Sales Discount Journal Entry
Sales Discount is a Contra Revenue Account for the
business because it reduces the Revenues of the business, but, in fact, increases revenues (Sales) later on because it generates huge Sales if successfully worked. But it is offered to
customers in the forms of Promo Codes, Discount Coupon Code, Special Discount
Offers to influence the customers to buy the goods at the cheapest prices and
ultimately, sales will be increases that enhance the Net Income / Net Profit at the
end.
In Accounting, Sales Discount means the concession given by the seller to the buyer on selling price, if the buyer makes payment before due date. But, it can also be given when the seller offers different packages for goods and services to buyers. The seller can give Sales Discount to buyer due to Old customer or it is the policy of company to offer Sales Discount to Customer at 50% Off or whatever promotion, they want to offer to customers. It is very important in order to encourage customers to buy and ultimately Sales of the business will surely increase at the end.
Sales Discount Journal Entry with The Help of An Example
Suppose, An Entrepreneur doing the
business of Cloths sell 5 pieces at the rate of Rs.2000 to his / her customer
(Accounts Receivable) and gives him / her sales discount of 10% of the Rs.10000
(Sales Price) of 5 Pieces, then we pass the following Accounting Journal Entry
in the Journal of the business:
Accounts Receivable / Debtor a/c 9000
Sales Discount / Cash Discount a/c 1000
(10% X 10000)
Sales a/c 9000
(Give 10% Sales Discount on the Sales of 5 Pieces of Cloths)
Since Sales Discount is a Contra Revenue Account for seller, so it is deducted from Gross Sales in Income Statement / Profit And Loss Account.
Sales Discount Normal Balance
The Normal Balance of Sales Discount is Debit as it is the reversal of Gross Sales and deducted from it on Income Statement.
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