Discount Allowed vs. Discount Received: What's the Difference?
Edited by Harlon Moss || By Janet White || Published on December 7, 2023
Discount allowed is a reduction in price offered by a seller, while discount received is a price reduction obtained by a buyer.
Key Differences
Discount allowed refers to a concession in price a seller provides to a buyer, often to encourage sales or prompt payment. Discount received is the reduction in cost a buyer enjoys, typically as a result of early payment or bulk purchasing.
In accounting, discount allowed is recorded as an expense by the seller. Conversely, discount received is recorded as a saving or income by the buyer.
Discount allowed serves as a strategy for sellers to boost sales volume or ensure timely payments. Discount received benefits buyers by reducing the overall purchase cost, improving their buying power.
The impact of discount allowed is seen in the seller's revenue, which decreases due to the price reduction. In contrast, discount received positively impacts the buyer's expenses, effectively lowering them.
From a financial standpoint, discount allowed affects the seller's cash flow and profitability, while discount received influences the buyer's cost management and budgeting effectiveness.
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Comparison Chart
Perspective
Seller's perspective
Buyer's perspective
Accounting Treatment
Recorded as an expense
Recorded as income or saving
Purpose
To increase sales or ensure prompt payment
To reduce purchase cost or improve buying power
Impact on Revenue/Expenses
Decreases seller's revenue
Reduces buyer's expenses
Effect on Cash Flow
Affects seller's cash flow
Influences buyer's cost management
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Discount Allowed and Discount Received Definitions
Discount Allowed
Price reduction given by a seller to a buyer.
We offered a 10% discount allowed to prompt early payment.
Discount Received
Reduction in purchase price obtained by a buyer.
Our company benefited from the discount received on early payment.
Discount Allowed
Seller's tool to encourage customer loyalty.
Our loyalty program includes a discount allowed for frequent shoppers.
Discount Received
Buyer's saving as a result of favorable purchasing terms.
The discount received from our supplier improved our profit margins.
Discount Allowed
An expense in seller's accounting books.
The discount allowed on last month's sales affected our profit margins.
Discount Received
An income or saving in buyer's accounting records.
The discount received was recorded as a saving in our financial statements.
Discount Allowed
A selling strategy to boost transaction volumes.
Our end-of-season discount allowed increased the store's foot traffic.
Discount Received
A tool for buyers to manage costs effectively.
Negotiating a larger discount received helped us stay within budget.
Discount Allowed
Concession in selling price for strategic purposes.
The discount allowed on bulk orders enhanced our sales volume.
Discount Received
Buyer's strategy to maximize purchasing power.
We leveraged our high-volume orders to maximize the discount received.
FAQs
What is discount allowed?
It's a price reduction offered by a seller to a buyer.
Why do sellers allow discounts?
To increase sales, encourage early payments, or build customer loyalty.
What is discount received?
A price reduction a buyer receives from a seller.
Does discount received always mean savings for the buyer?
Generally, yes, as it reduces the overall cost of purchases.
How is discount allowed recorded in accounting?
As an expense in the seller's financial records.
Can discount allowed affect profitability?
Yes, it can reduce the seller's profit margins.
Why do buyers seek discounts?
To reduce purchase costs and manage their budgets effectively.
What is a typical scenario for offering a discount allowed?
During promotions, bulk sales, or for early payment incentives.
Can discounts impact cash flow?
Yes, discount allowed can reduce cash inflow, while discount received can improve cash outflow.
Can discount allowed be a percentage or a fixed amount?
It can be either, depending on the seller's policy.
Are discounts always monetary?
Primarily, though they can also be in the form of additional goods or services.
Are discounts received usually advertised?
Not always; some are negotiated or part of a contract.
How is discount received recorded?
As income or a saving in the buyer's accounting books.
How does discount received affect a buyer's financial planning?
It helps in effective cost management and budgeting.
Do all companies offer discounts?
Not necessarily; it depends on their sales strategy and market conditions.
Does discount allowed always lead to increased sales?
Often, but not always; it depends on the market and consumer behavior.
What's a common situation for receiving a discount?
When making early payments or buying in bulk.
Is discount allowed beneficial for long-term customer relations?
Yes, it can build customer loyalty and repeat business.
Can a transaction involve both discount allowed and received?
Yes, in transactions between businesses, both can occur.
Is negotiating for discounts common?
Yes, especially in B2B transactions.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
