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

The discount received on the purchase of office furniture that will be used by a company is recorded in the same asset account in which the office furniture is recorded. That account might be Furniture and Fixtures or Office Furniture. (The discount is not recorded in Purchase Discounts as this account is only for the discounts on the purchase of merchandise that will be sold.)

To illustrate, let's 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 a 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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