Accounting and tax treatment of discounts

Abstract

In a competitive market environment, the execution of sale-purchase transactions involves operating with discounts intended to reward a customer’s loyalty, early repayment of a debt, and, last but not least, to incite the customer to buy, all this leading to an increase of the turnover. The analysis we have done in this article presents the most important rules on discounts regulated by the legislation in force, which must be taken into account in accounting for such transactions. The distinction between the different types of discounts is important and should be made from the beginning in order to apply the appropriate accounting and tax treatment.