Question

What is meant by provision for discount on debtors?

Answer 1

The maintenance of the provision for discount on debtors is done in order to encourage the payment from the debtors of the business before the date which is due.

The discount is hence made to encourage the timely payment by the debtors especially the ones who have a bad record for doing so.

This provision is maintained in the side of the debit of the profit and the loss account and is shown as the deduction from the debtors on the side of the asset in the balance sheet.