on 09-18-2008 4:19 AM
How do we make sure that the "cash discount taken account" from vendor, does not show up in financial statement. Because when we create this G/L account as P & L account, all the discounts availed will go to this account. So how do we avoid this account showing up in financila statement because the balance in this account is just for information and is not the actual balance.
Sheena
I am not sure. Discount received and Discount paid are both accounts that need to be considered in the profit and loss account. How is it that this is nto relevant?? Is it trade discount that you are referring to or if its a cash purchase you would be recording the sale at the cash that you have paid the vendor.
However if you want to avoid considering any accounts from figuring in the B/S or Profit and Loss account, then just dont assign the GL account in the FSV. This should solve your purpose.
Karthik
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This is the discount amount that gets posted to the cash dicount account that we receive from the vendors for paying early. Suppose we were to pay 100 but got 25% for paying before time and paid only 75. we actually paid 75 not 100. 25 goes to cash discount account. this should not show up in financial statement because this is a statistical amount and is only for information. this is not a real amount that we paid?
If you are following the accrual method this should figure in your profit and loss account. Else your Balance sheet will not tally.Also when you have created this account as a profit and loss account then this will get effected in the retained earnings account. I am not sure why you feel this is statistical. This has to be accounted for.
See when you have made a purchase of Rs. 100, the entry you would have passed will be
Inventory ac Dr 100
Vendor ac Cr 100
When you pay early the entry would be
vendor ac Dr 100
cash dis ac Cr 25
bank ac Cr 75
This will have to be shown in your P&L. Else how will your double entry accounting be comopleted?
Remove its assignment from the financial statement version (FSV)
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Hi Sneha,
Create GL account "Cash discount taken account as statistical.
Regards,
Satish Muvva.
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