When “Discard GRN Discount” is Turned ON

How it Works:

• Discounts from suppliers are not recorded in the GRN (Goods Received Note) ledger.

• The GRN only reflects the inventory or goods at their gross value (before discount).

• The discount is entirely recognized at the purchase invoice stage.

• This results in the discount being credited as income (Discount Received) only when the purchase invoice is posted.

Impact:

• The Discount Received account will show the total discount earned as a credit in your trial balance and profit & loss (as actual income).

• The inventory or standard cost is not influenced by supplier discounts, as discounts are handled separately in the GL (not deducted directly from inventory cost).

• This approach makes it easy to track and report total discounts received from suppliers.

When “Discard GRN Discount” is Turned OFF

How it Works:

• Discounts are recorded at the GRN stage as a debit entry to Discount Received.

• When the purchase invoice is matched, the discount is credited (reversed) in the Discount Received account.

• The net effect in the Discount Received account is zero, as every debit at GRN is offset by a credit at invoice.

Impact:

• You cannot see the total discounts received in your trial balance or profit & loss, because the account nets to zero for each transaction.

• The discount benefits are “absorbed” into the inventory value, so the inventory is recorded at net-of-discount cost on the GRN date.

• While your inventory values are accurate, you lose clear visibility/reporting of discount income, which is often needed for supplier negotiation analysis or statutory disclosures.

Practical Example

Suppose you buy goods for INR 1,000 with a discount of INR 100:

• If “Discard GRN Discount” is ON:

  • GRN: Inventory Dr. 1,000 | GRN Clearing Cr. 1,000

  • Invoice: Accounts Payable Dr. 900 | Discount Received Cr. 100 | GRN Clearing Cr. 1,000

• If “Discard GRN Discount” is OFF:

  • GRN: Inventory Dr. 900 | Discount Received Dr. 100 | GRN Clearing Cr. 1,000

  • Invoice: Accounts Payable Dr. 900 | Discount Received Cr. 100 | GRN Clearing Cr. 1,000

  • Discount Received gets Dr. 100 at GRN, Cr. 100 at invoice—the balance becomes 0.

Key Differences

Why the “ON” Option is Considered Best Practice

• Keeps inventory and standard cost clean and auditable (without discount manipulation).

• Provides transparent reporting on total discounts received, which is vital for supplier performance analysis and statutory reporting.

• Fits with leading ERP/Accounting standards for purchase discount handling