I know a business with plenty of vendors who still offer 2/10 Net30
terms. (furniture industry)
Since the 2% is deducted from the payment, the expense is directly
reduced by a contra-account 'Discounts and Allowances'.
I don't recall any cases where full payment had to be rendered and then
the 2% discount credited later, but I would imagine the accounting would
be the same, with the credit simply applied to a future invoice.
Regards,
Adrien
On 10/15/21 11:15 AM, Michael or Penny Novack wrote:
Perhaps historical perspective might help, especially with businesses,
because might want to treat the same way as when invoices typically were
like this, except conditional on when paid.
I have no idea how accrual treats this (would have treated this) when in
the old days a vendor might send an invoice like this:
Immediate, 2% discount, 30 days net, else 1% per month.
I am old enough to remember those days. Assuming the accrual system
treated the "30 days net" as normal, what was done if paid immediately?
That closely resembles the situation of credit card rebates on
purchases. As to the argument wanting to distribute to reduce all
expenses paid during that billing period, is that also being done in
reverse with interest charges (if any -- often a business credit card is
not intended as a source of credit and balance paid each month -- and
SOME people ca manage that with their personal credit cards too)
Michael D Novack
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