Recording Sales Discounts


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Hi,

As part of our business, we have a Training Center that offers various technical training courses and programs. The training fees for local citizens are 100% exempt by management policy. Those represent more than 50% of the operating revenue of the center.

Training discounts have been recorded against Training Revenue as the accounting principles stipulate, however, the finance management is trying to find a way to avoid overstating the Center’s revenues and expenses by not recording the discounts and therefore the revenue from local citizens.

Is there a professional principle or article that allows such action?
 
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kirby

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You might consider showing the detail (Gross sales, Sales Discounts) in the footnotes and then just showing the net amount (Sales net of discounts) on the Income Statement.
 
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Not recording the discount would make the accounts not based on the true economic substance of the transaction.

So long as the discounts are not bogus, the revenues cannot be overstated.

Kirby is right, use footnote to state that the revenue figure is net of discount..
 
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Well, as every one else, suggest - the recording of discounts is a must. However, to ensure that the revenue are no over booked - the reports could be amended in such a way that the training discount is deducted from Gross sales to reflect the Net Sales. This can also help not over stating revenue and at the same time can help keeping the training discounts in place.
 

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