How to Treat Customer Discounts in Your Bookkeeping

How to Treat Customer Discounts in Your Bookkeeping

Confused as to whether discounts are treated as income or expenses?

By Marcia Smith

Are you planning to offer discounts to clear stock, recruit new customers or create reward schemes? Great. But be aware that when you're working on your bookkeeping, the figures need to be noted correctly .

Sales discounts should not be recorded as an expense in your books. Instead, they should be treated as reduced sales – by value. Selling at a discount still generates income, it just leads to lower gross revenue. Put simply, you’re offering a reduction in price rather than adding an extra cost to the running of the business.

Whatever your reason, it’s advisable to make sure these are specifically recorded in your books so that you aren’t wondering why sales were down one month! Using sub-items such as ‘Bank Holiday Sale’ makes it much easier to track records.