Question

Which discount is earned for payment of cash or allowed for receipt of cash.

Answer 1

Cash discount is allowed to the customers for making prompt payment. In other words, cash discount is allowed only if the customer makes the payment within a fixed period.

Such discount motivates the customer to make the payment at the earliest.

As the discount is allowed at the time of making payment, so the entry for cash discount is recorded along with the entry payment.

Discount is a nominal account and as such, it s debited when it is allowed to a customer and credited when it is received.