If your company routinely takes all purchase discounts, you can simplify your record-keeping by recording all purchases at the net rather than gross amount. Record missed discounts in a Purchase Discounts Lost account using the net-price method, as follows:
Your company receives an invoice for $10,000 with credit terms of 2/10, n/30. Under the net price method, the following entry is recorded:
To record receipt of invoice:
To record payment:
If, for any reason, the bill is not paid on time, the entry is:
|Purchase Discounts Lost||200|
The Purchase Discounts Lost account does more than simplify bookkeeping—it brings attention to money-saving discounts that your firm may be missing.
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