Rectification Entry for Discount of RS.250



Discount is a reduction in the selling price of a product or service. It is usually given to customers as an incentive to encourage them to make a purchase. In accounting, discounts are treated as expenses and are recorded in the books of accounts.

In this case, Palak has given a discount of RS.250. However, the discount amount has been incorrectly credited to both Palak's account and the Discount Received account. This is an error that needs to be rectified.



To rectify this error, we need to reverse the incorrect entry and record the correct entry. The rectification entry will involve debiting the Discount Received account and crediting Palak's account.

The rectification entry can be recorded as follows:

Discount Received A/C Dr. RS.250
Palak's A/C Cr. RS.250

The Discount Received account is debited because the discount amount is an expense for the business. By debiting the Discount Received account, we are reducing the expense.

Palak's account is credited because the discount amount should be deducted from his account. By crediting Palak's account, we are reducing the amount owed by him.



The rectification entry will have the following impact on the financial statements:

1. Income Statement: The rectification entry will reduce the expense recorded in the Discount Received account. As a result, the net income of the business will increase.

2. Balance Sheet: Palak's account will show a decrease in the amount owed by him. This will reduce the liabilities of the business.

Overall, the rectification entry will correct the error in the accounts and ensure that the financial statements reflect the correct financial position of the business.

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