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Purchases Discount is a Contra Expense Account which is given to buyers by suppliers of goods while a sales discount is the opposite of Sales Discount which is a Contra Revenue Account which is given by sellers to buyers when they sold goods or services to them. A Purchases Discount is given b y the supplier or ve ndor to t he compa ny on t he purchase of goods while a Sales Discount is given b y the compa ny to its customers to induce t hem to purchase at a discou nted price. Form t he poi nt view of t he b usi ness of t h e company, it is a Sales discount and from t he poi nt view of b uyer’s b usi ness it is a purchases discou nt. Purchases discount is deducted from Total Purchases in order to calculate net purchases while sales discount is deducted from Gross or Total Sales in order to calculate net sales for the period in Income Statement . Purchases Discou nt is a  Contra Expense Account  w h ic h  is deducted fro...

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 ...

What is Discount In Accounting? | Accounting Treatment Of Different Types Of Discounts It is an allowance given to buyers to influence them to buy goods / products or services at cheaper prices. Ultimately, it increases the Sales  of the business. Recording of it in Accounting depends upon different types of discounts. The main types of discounts are Purchases Discount , Sales Discount , Discount Received, Discount Allowed, Cash Discount and Trade Discount. N ow, we will discuss about the journal entries related to these specific types. For  Purchases Disc. , we record the following entry as shown below:                                         Accounts Payable a/c  XXX                                               ...

The Quick Ratio improves upon the current ratio by recognizing that Inventory or Stock is least Liquid Asset as it eliminates closing inventory and prepaid expenses to make sure that all of the remaining Assets are more close to convert into cash very easily and quickly. The purpose of quick ratio is to show most liquid assets such as Cash and Cash Equivalents + Accounts / Receivable that meet current obligations of the business easily on daily basis.

As Rent Paid In Advance / Prepaid Rent is an example of Prepaid Expenses which are Current Assets so, it affects asset side of Accounting Equation . Moreover, it also depends upon accounting systems which are followed by a business. 1. On Accrual Basis of Accounting System                               (Assuming That Prepaid Rent Initially recorded as an Asset)                                                    Prepaid Rent a/c  5000                                                                               Cash a/c  5000 ...

Furniture & Fixtures (which are Fixed Assets /   N on Current Assets ) are purchased and sold journal entries depend upon the use of these Assets whether these are purchased to use in the office or purchased for resale purpose as it is the main business’s product to sell on daily basis to its customers. These  are debits in trial balance as these have favorable balance on debit side of T-Account. 1. When Furniture & Fixtures Purchased or Sold for Office Use In that case, we purchase furniture & fixtures for use in the office as a fixed asset to carry on the daily routine of the business’days. The journal entry for purchase of new furniture & fixtures of Rs. 500000 is shown below:                                               Furniture & Fixtures a/c  500000           ...

Under the Allowance Method , estimated uncollectible accou nts receivables are credited to Allowance for Doubtful Accounts / Provision for Doubtful Debts as it is an estimation of total amount of sales made to customers that may be unpaid or remain uncollectible sales amount due to Bad Debt Expense as the customers may fail to pay on time or unable to pay due to insolvency. Allowance for doubtful accounts is a contra asset account which is deducted from Accounts Receivable / Debtors on balance Sheet in order to calculate the net realizable value of accounts receivable.