Cash Discounts and Net Method

Cash Discounts are reductions for credit customers to incentivize quick payments, for instance, 2/10, n/30. A Net Method accounting will:

• Debit Accounts Receivables for the Discounted Price
• Credit Sales Revenue for the discounted price

 
And once payment comes, it will:

• Debit Cash net of Sales Discount
• Credit Accounts Receivables reflective of the Cash net of discount

 
And if a customer pays without the discount:

• Debit Cash for full amount
• Credit Accounts Receivables
• Credit Sales Discount Forfeited

 
After recording all the transactions you will have: Sales + Discount Forfeited = Net Sales Revenue