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Old 12-31-2003, 10:41 AM
lcblacker lcblacker is offline
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Join Date: Dec 2003
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Vendor Discount Account

We have a vendor who has just started including a 2% 10 discount.

I need to set up an account to track the discounts - what type of account would this be?

QuickBooks seems to suggest an income account but that doesn't seem appropriate to me. Can someone explain?


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Old 12-31-2003, 12:28 PM
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RCollier RCollier is offline
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Location: Texas
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Yes, discounts earned from vendors would be posted to an income account. The reasoning behind this is, I believe, that it would work something like a contra-COGS account. In other words, you are reducing your COGS by the discount.
Russ M. Collier, CB
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Old 12-31-2003, 01:25 PM
Joey Joey is offline
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That's correct. You can also set up a CGS type of account called Less Vendor Discounts and "drag" that account down under your CGS account for Purchases. Then when you look at your P&L Report your will see:

Sales $100.00

Purchases 50.00
Less Vendor Discounts - 1.00
Total CGS 49.00

Gross Profit $ 51.00

Instead of your income being higher, your CGS will be reduced. I think it's more meaningful this way.
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