A provision for discount on creditors is created to account for the possibility of creditors availing discounts on their outstanding dues. This is done because many suppliers offer discounts to their customers if they pay their dues within a certain period.

For example, if a supplier offers a 5% discount on the total amount payable if the customer settles the dues within 30 days of the invoice date, the provision for discount on creditors is created to account for this possibility.



When a firm decides to close its business operations and liquidate its assets, a Realisation Account is created to record the transactions related to the sale of assets, payment of liabilities, and distribution of the remaining proceeds among the partners.

The journal entry for the provision for discount on creditors in the Realisation Account would be as follows:

Realisation Account Dr. 2,500 (50,000 x 5%)

To Provision for Discount on Creditors Account 2,500

Explanation:
- The Realisation Account is debited because the provision for discount on creditors reduces the amount of liabilities that the firm owes to its creditors.
- The Provision for Discount on Creditors Account is credited because it represents the amount of money that the firm has set aside to account for the possibility of discounts being availed by its creditors.

The provision for discount on creditors is created by multiplying the outstanding balance of the creditors by the percentage of discount that they are eligible for. In this case, the balance of creditors is 50,000 and the discount rate is 5%. Therefore, the provision for discount on creditors would be 2,500.



Creating a provision for discount on creditors is an important accounting practice that helps firms to account for the possibility of discounts being availed by their creditors. This provision reduces the amount of liabilities that the firm owes to its creditors and helps in calculating the true value of the firm's assets.

Creditor acc. dr 2500 to provision for discount on creditor acc 2500
sorry when I answer this question I did not see realization acc so entry is that
realization acc dr 2500 to provision on discount on creditors