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Discount on Fixed Assets

Discount on Fixed Assets

Hi

Please could you give me some advice on the correct treatment of a discount on fixed assets. Would the discount be credited to the asset account or the P&L?

If possible please could you provide a link for backup as I can't find anything.

Many thanks

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26th Feb 2016 17:25

Duplicate

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By tom123
26th Feb 2016 19:15

What is happening to this asset

If you are buying it, just include it at the cost you actually pay.

Not really sure what is being 'discounted'

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By ADA123
27th Feb 2016 01:07

Garage paid part of deposit for new company car. I entered asset at amount paid. Accountant is telling me the 'discount received' should be credited to p&l?

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By tom123
27th Feb 2016 08:17

A straightforward no from me.

ADA123 wrote:
Garage paid part of deposit for new company car. I entered asset at amount paid. Accountant is telling me the 'discount received' should be credited to p&l?

An asset should be stated at the lower of cost or net realisable value.

In this transaction, the cost is what you paid.

If you credit P&L with a discount, you will then be overstating the cost.

This shouldn't be contentious.

 

Discounts received tend to be settlement discounts (who does those anymore..), and are small credits to the P&L. In theory these happen after the original invoice is posted at full value - so this avoids changing whatever earlier transactions have been posted.

EDIT - is this car being bought on finance?

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27th Feb 2016 08:46

Agreed

tom123 wrote:

ADA123 wrote:
Garage paid part of deposit for new company car. I entered asset at amount paid. Accountant is telling me the 'discount received' should be credited to p&l?

An asset should be stated at the lower of cost or net realisable value.

In this transaction, the cost is what you paid.

If you credit P&L with a discount, you will then be overstating the cost.

This shouldn't be contentious.

 

Discounts received tend to be settlement discounts (who does those anymore..), and are small credits to the P&L. In theory these happen after the original invoice is posted at full value - so this avoids changing whatever earlier transactions have been posted.

EDIT - is this car being bought on finance?

Not sure why accountant would suggest anything else tbh

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By ADA123
27th Feb 2016 09:36

Yes, the car is being bought on finance, does this make a difference?

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