If I am interested in keeping track of the amount I have saved through coupon discounts, how can i Post the transaction on a ledger. Can't see discount falling into any category: asset, expense, liability, equity, or revenue.
1 Answer
The discount reduces your expense, but is not a revenue.
So what you should likely do is book them as an expense, but on the opposite side of the ledger (assuming double-entry book-keeping).
Hence, if you would normally credit an expense account when buying something, you would debit an expense account for the amount of the coupon when you use a discount coupon.
That will allow you to track the discount coupons that you use separately, as you can give them an expense account of their own.
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Thanks Michael. I got the idea of treating it as an expense but what is the other account that should be changed correspondingly. It doesnt seem to be impacting any asset or liability or revenue or net equity. Example: assume I purchased a guitar with my credit card while receiving a discount of 10% on the original price of $500. Here is the transaction journal entry Credit Card Account (Liability) - Credit $450 Musical Instruments (Asset) - Debit $450 If I want to add an entry to track the savings made through coupons Coupon Discounts (Expense) - Credit $50 ????? What is ????? Sep 23, 2016 at 23:13