Difference Between Allowance And Discount

An Allowance is offered by the seller to the buyer to retain the goods at below standard price because of minor defective goods or it is created to calculate the Net Realizable Value of Different Types of Accounts either on the basis of Income Statement or Balance Sheet as it is a Contra Account while Discount is given by the seller to the buyer to persuade him to buy products or goods at cheaper or discounted price. Ultimately, it increases the Sales for the period. Like allowances, discounts are also Contra Accounts.

Examples of Allowances are Purchases Allowance, Sales Allowance, Allowance for Doubtful Accounts, Allowance for Accumulated Depreciation, etc., while examples of discounts are Purchases Discounts, Sales Discounts, Cash Discount, Discount Allowed, Discount Received, Trade Discount, etc.