The discount is a financial technique to get the cash .

Typology and issues


The bank discount is a transaction of assignment to a bank of a bill of exchange held by a third party (the creditor, the supplier, the beneficiary, the drawer) on one of his clients (the debtor, the client, the drawee) in exchange for a cash advance. The bank is able to turn against all the signatories of this effect.

The cash discount (cash, financial) is a price reduction granted for cash payment. The discount rate must be indicated on the invoice .

The commercial discount is an operation in which a customer pays the invoice from its supplier cash instead of waiting for the due date, by withdrawing a percentage in exchange (the percentage removed is also called discount).


It’s a way to get short-term credit and improve cash flow.

Reduce the cost of your discount

In recent years, a practice has spread to allow companies using the discount to reduce the percentage ceded. The reverse factoring effectively allows large companies to play their reputation for repayment of the debt, and thus the discount rate is diminished for the supplier. This practice reflects the willingness of major contractors to benefit from preferential rates their smaller suppliers, and thus to build more beneficial commercial relations 1 .

Key Features

Bank discount

Main article: Bank discount .

The bank discount is a short-term credit transaction , whereby commercial paper is transferred to the banker who in return for their immediate payment, net of interest and commissions.

The settlement discount

  • In the case of property, plant and equipment , the discount is deducted from the asset’s entry value.
  • For purchases of stored goods (raw materials, goods, stored supplies recorded in account 602) the discount is deducted from the purchase price (French Accounting Standards Compendium art. 213-31) and is not recorded as such.
  • In the case of sales of goods and services, discounts are charged to debit account 665 (this is a price reduction) and account 765 to credit for purchases of non-stock goods and services .
  • It is calculated before the Value Added Tax (VAT).

The billing scheme of a standard invoice (example of 110  of purchase price – 10% of discount means a net excluding tax of 99  , followed by a discount of 10% (thus 9.9  ) and 17,82  of VAT) is in France:

Calculation: 110 – 11 = 99 €; 99 – 9.9 = 89.1 €; 89.1 * 20% = 17.82 €; 89.1 + 17.82 = 106.92 €

For fixed assets , purchases of inventories or, in the case of IFRS , discounts are deducted from the purchase price and not shown in accounts 665 and 765.

For a purchase:

Account Entitled Debit Credit
6 purchase accounts 99,00
44566 VAT deductible on other goods and services 17.82
765 Discounts obtained 9.90
401 suppliers 106.92

For a sale:

Account Entitled Debit Credit
411 customers 106.92
665 Discounts granted 9.90
44571 VAT collected 17.82
7 sales account 99,00

See also

On other Wikimedia projects:

  • discount , on Wiktionary

Related Articles

  • factoring
  • Invoiced factoring
  • Business Mathematics
  • Means of payment
  • Discount rate
  • Types of bank credits

External links

  • Collection of French Accounting Standards:églements/2014/Reglt2014-03/Recueil%20with%20tables%20and%20couverture.pdf  [ archive ]

Notes and references

  1. ↑ Inverted factoring  [ archive ] , the new economist

Leave a Reply

Your email address will not be published. Required fields are marked *