Provision for Discount on Debtors

To motivate the debtors to make prompt payments, cash discount may be allowed to them. After providing provision for bad and doubtful debts, the remaining debtors are called as good debtors. They may pay their dues in time and avail themselves of the cash discount permissible. So a provision for discount on good debtors at a certain percentage may have to be created.

Provision for discount on debtors will be shown on the debit side of Profit and Loss account and on the asset side of the Balance sheet by way of deduction from Sundry debtors (after deducting bad debts written off and provision for bad and doubtful debts).