Discount Allowed vs. Received: Key Accounting Differences Explained
Discount Allowed is the reduction a seller gives to its customers. Discount Received is the reduction a buyer enjoys from its suppliers.
People confuse them because both relate to price cuts, but one is an expense on the seller’s books while the other is income to the buyer. The same invoice looks opposite on each side.
Key Differences
Sellers record Discount Allowed as an expense; buyers record Discount Received as a gain. They mirror each other, never appearing together on the same set of books.
Examples and Daily Life
A coffee shop gives you 10% off; it logs Discount Allowed. You pay less and, if you run a business, may log Discount Received. Same receipt, two views.
Can both discounts appear in one firm’s books?
No. A company either gives or takes the discount, so only one side is recorded.
Is cash discount the same as trade discount?
Trade discounts adjust list prices before invoicing, while cash discounts encourage early payment after invoicing.