Provision for Discounts Allowable

In some cases a firm may create a provision for discounts allowable in addition to provision for doubtful debts. This happens where a firm anticipates that some of the debtors may take up cash discounts offered the firm. The accounting treatment is similar to accounting for provision for doubtful debts. The provision should be made after creating a provision for doubtful debts (debtors figure less either general/specific provision for doubtful debts).

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