Dictionary of Accounting Terms: discount lost
discount lost
cash discountnot taken because of the buyer's failure to pay within the specified time period. The discount lost occurs only when purchases are recorded net of the discount. If the discount is not taken advantage of, the gross amount will be paid. Assume a $1000 purchase on terms of 2/10, net/60. The journal entry for the purchase is to debit purchases and credit accounts payable for $980. If payment is made after 10 days, the entry is to debit accounts payable $980 and purchase discount lost $20 and credit cash $1000. Purchase discount lost is an expense account.
