Difference Between Discount Received And Discount Allowed

The main or primary difference between Discount Allowed And Discount Received is that discount allowed is given by sellers to its buyers or customers when goods sold to them while on the other hand, discount received is given to buyers of goods or services by suppliers / creditors when they made Purchases.

Discount allowed is a Contra Revenue Account for the selling company as it reduces the selling price while discount received is a Contra Expense Account for the purchasing company as it reduces the purchasing price of goods or services.

Discount allowed is recorded in the Income Statement as a contra revenue account and it is deducted from gross sales to calculate net sales while discount received is recorded in income statement as a contra expense account and it is deducted from gross purchases in order to calculate net purchases.

In recording discount allowed, we debit it as it decreases the amount of Sales Account while discount received is credited as it decreases the amount of purchases account.