Discount allowed are allowed on sale transactions. There are basically two types of discount, which you may allow to your debtors or customers.
- This discount is allowed to your debtors or
customers for cash sales or to a special classification or group of debtors or
customers, e.g. trade customers, retailers, etc. Is allowed at the time when
you sell items or services to your debtors or customers. This discount is
usually deducted from the selling price at the time of sale. Only the net
selling price is reflected and no discounts are physically recorded as a
transaction. This discount will reduce the selling price of the sales and
consequently your gross profit will be affected.
If you are a service entity (and you do not generate documents from the stock item code file), you need to specify this discount in your hand written sales invoices.
- Discount allowed for the early settlement of accounts - This discount is allowed to your debtors or customers at the time of the settlement of their account. You may agree with your customers to allow a certain percentage of discount allowed e.g. 2½ % if they settle the full amount on an invoice within 30 days). This discount is recorded when a debtor or customer settles the full invoice within the specified time. This discount needs to be entered as an expense in a Discount Allowed account and will reduce the net profit and will have no effect on the gross profit.