Accounting and tax treatment of discounts

• Author: Trifan A.
• Pages: 201-208

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 10 (59) No. 2 - 2017

Accounting and tax treatment of discounts

Adrian TRIFAN1

Abstract: In a competitive market environment, the execution of sale-purchase transactions

involves operating with discounts intended to reward a customer’s loyalty, early repayment

of a debt and, last but not least, to incite the customer to buy, all this leading to an increase

of the turnover. The analysis we have done in this article presents the most important rules

on discounts regulated by the legislation in force, which must be taken into account in

accounting such transactions. The distinction between the different types of discounts is

important and should be made from the beginning in order to apply the appropriate

accounting and tax treatment.

Key-words: discounts, accounting treatment, tax treatment

1. Overview

In the accounting theory there are trade discounts and financial discounts.

Trade discounts are:

a) rebates – they are received for quality defects; they are practiced on the

selling price;

b) volume discounts – they are received in case of sales higher than the agreed

volume or if the buyer has a preferential status;

c) refunds – they are discounts calculated on all transactions made with the

same third party over a specified period.

Financial discounts are in the form of settlement discounts granted for the

settlement of the debts before the normal due date.

2. Accounting treatment of discounts

Discounts are different for many reasons, which is why the way of recording in the

accounting is different and therefore we will analyze them separately.

1Transilvania University of Brașov, Faculty of Economic Sciences and Business Administration,

adrian.trifan@unitbv.ro