Speed up sales processes with the flexibility to apply special discounts
Trade discounts are generally ignored for accounting purposes in that they are omitted from accounting records. Therefore, sales, along with any receivables in the case of a credit sale, are recorded net of any trade discounts offered.
Cash discounts result in the reduction of sales revenue earned during the period. However, not all customers may qualify for the cash discount. It is, therefore, necessary to record the initial sale at the gross amount and subsequently decreasing the sale revenue by the amount of discount that is actually allowed.
A sales discount is a reduction in the price of a product or service that is offered by the seller, in exchange for early payment by the buyer. This approach is commonly used when a seller is in immediate need of cash.
Quantity Discounts allows you to easily apply quantity price breaks for each product based on a minimum quantity to speed up sales processes with the flexibility to apply special discounts.
If a customer takes advantage of these terms and pays less than the full amount of an invoice, the seller records the discount as a debit to the sales discounts account and a credit to the account.
The sales discounts account appears in the income statement and are a contra revenue account, which means that it offsets gross sales, resulting in a smaller net sales figure.