Account

[Former Member]

'Cash Discount Account' And 'Cash discount Clearing account' should be same or not?

[jitin_chawla · Accepted solution]

Hi,

Further information which could be helpful :

The Cash Discount Clearing Account is only used when the 'Net Procedure'

option is selected in the Accounting tab of the 'AP Invoice' function.

The 'Net Procedure' enables recording in advance of any future discount available from purchases. In this approach, the debiting account for the purchase is automatically reduced by the amount of the future discount.

For example, if a 5 % discount is given for a $100 Invoice, the journal entry to record the AP Invoice will be as follows:

Dr. Inventory - $95

Dr. Cash Discount Clearing - $5

Cr. BP Supplier - $100

If the 'Net Procedure' option is not selected, the cash discount will only be recorded upon payment of the AP Invoice. Hence, the journal entry for the AP Invoice will be as follows:

Dr. Inventory - $100

Cr. BP Supplier - $100

Hope it could be helpful.

Regards,

Jitin

[former_member583013]

They can be the same or can be different. There is no hard and fast rule.

I would keep them seperate just for tracking purposes