A fundamental accounting issue is how to account for purchase transactions when discounts are offered. One technique is the gross method of recording purchases. This technique records purchases at their total gross or full invoice amount 5,000 11-5-x7 Purchases Accounts Payable Purchased Inventory on account, terms 2/10, n/30 5,000 If payment is made within the discount period, the purchase discount is recognized in a separate account. The Purchase Discounts account is similar to Purchases Returns & Allowances, as it is deducted from total purchases to calculate the net purchases for the period 11-13-X7 Accounts Payable 5,000 Purchase Discounts 100 Cash 4,900 Pald outstanding payable within discount period, discount taken ($5,000 X 2% = $100) If payment is made outside the discount period, the entry is quite straightforward: 5,000 11-29-x7 Accounts Payable Cash Paid outstanding payable outside of the discount period 5,000 A fundamental accounting issue is how to account for purchase transactions when discounts are offered. One technique is the gross method of recording purchases. This technique records purchases at their total gross or full invoice amount 5,000 11-5-x7 Purchases Accounts Payable Purchased Inventory on account, terms 2/10, n/30 5,000 If payment is made within the discount period, the purchase discount is recognized in a separate account. The Purchase Discounts account is similar to Purchases Returns & Allowances, as it is deducted from total purchases to calculate the net purchases for the period 11-13-X7 Accounts Payable 5,000 Purchase Discounts 100 Cash 4,900 Pald outstanding payable within discount period, discount taken ($5,000 X 2% = $100) If payment is made outside the discount period, the entry is quite straightforward: 5,000 11-29-x7 Accounts Payable Cash Paid outstanding payable outside of the discount period 5,000