Where is the discount on the purchase of office furniture recorded?

Definition of Discount on Purchase of Office Furniture

The discount on the purchase of office furniture that will be used by a company (as opposed to being resold by a furniture retailer) is recorded in the same asset account in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset's cost.

[If the discount is received by a retailer who is in the business of buying and selling office furniture, the discount is likely recorded in the general ledger account Purchase Discounts.]

Example of Discount on Purchase of Office Furniture

Assume that a company purchases furniture for the office of a newly appointed executive. The cost of the furniture is $10,000 and the invoice allows an early payment discount of 1% if it is paid within 10 days. If the company pays the invoice within 10 days, the Furniture and Fixtures account will increase by $9,900 ($10,000 minus the discount of $100). The depreciation calculations will be based on the cost of $9,900.

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