Purchase Discounts Reconsidered.

Accounting practices sometimes evolve through Inclusion in college textbooks without specific consideration by authoritative bodies. Many times the only way to debate such issues is to challenge them in accounting Journals. One such issue relates to the practice of initially recording and subsequently reporting merchandise purchases at the net cost (after cash discounts allowed). This paper examines the nature of the purchase discount, traces the evolution of current classifications, and summarizes prevalent practices in industry. It Indicates that Industry practice tends support to treating the purchase discount as revenue. Further, generally accepted accounting principles relative to other issues provide precedent for considering the discount as revenue.