Dictionary / Discount Lost
What does Discount Lost mean in accounting?
Quick definition
Cash & bankingA cash discount on a purchase, not taken advantage of because of failure to pay before the expiration of the discount period. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Missed 2/10 posts as discount lost
You run a commercial bakery. A flour mill bills you $2,400 on June 3 for a pallet of bread flour, terms 2/10 net 30. You enter the bill at the net $2,352, planning to pay by June 13, but you cut the check on June 21 and lose the $48. In QuickBooks Online or Xero, pay $2,400 from checking, clear the $2,352 payable, and code the $48 to discount lost (an expense). Do not add that $48 back into flour inventory; the extra is the cost of missing the window.
Paying inside 2/10 is not this
You run an auto body shop. On April 8, a paint supplier bills $860 for a case of basecoat, terms 2/10 net 30. You pay $842.80 on April 15, inside the window, so the $17.20 is discount on sales or purchases, the allowance for settling early, not discount lost. In QuickBooks Online or Xero, apply $860 to the bill and code $17.20 to purchase discounts so accounts payable clears. Post discount lost only when you miss the window and pay the full invoice.
Why it matters
Discount lost is the early-pay cash discount you missed on a purchase because you paid after the window closed. You will not post this most months; it shows up when a supplier offers terms like 2/10 net 30 and you settle after the discount days. If you entered the bill at the net (discounted) amount, the extra you pay has to hit an expense, not inventory or job materials, or a cash-timing miss lands in cost of goods. Mix this up with discount on sales or purchases (the allowance when you do settle early) or with a cash discount you actually took, and the books treat a miss as a savings.
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What is Discount Lost in bookkeeping?
A cash discount on a purchase, not taken advantage of because of failure to pay before the expiration of the discount period.
When should I use Discount Lost?
Use Discount Lost when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Discount Lost?
Discount Lost is used for discount lost entries, while Daybook covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.