Question

What is meant by provision for discount on debtors?

Answer 1

This is a discount which is being allowed by an enterprise to its debtors to encourage prompt payments. Discount likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discount on debtors. Here, it is to be remembered that provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts.