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Provision for Discount on Creditors
When the business makes prompt payments of its debts, it is bound to receive Discounts from its creditors.
Although the discounts will be earned in the next year, the discounts so earned are an income of the current year.
A Provision for such discount is made in the current year itself so that that the discounts thus earned may be credited to the Profit and Loss Account of the current year.
| Provision for Discount on Creditors Account | Dr. | |
| Profit and Loss Account | ||
| (For provision for discount on Creditors) | ||
Accounting Treatment
Provision for Discount on Creditors will be shown on the Credit side of the Profit and Loss Account.
It is deducted from Sundry Creditors on the Liabilities side of the Balance Sheet.