Discounts received are

Discounts received are cash discounts a business is given by its suppliers for paying amounts owed promptly. Because this discount reduces what the business has to pay for goods already recorded at full price in the Purchases account, it represents a gain to the business, not a trading item.

Gains of this kind are recorded in the Profit and Loss Account, on the credit side, because they increase net profit without arising directly from the buying and selling of goods that the Trading Account measures. The Trading Account is reserved for calculating gross profit from sales, cost of sales, and closing stock, so a financial gain such as a discount received does not belong there.

It is also useful to keep discounts received and discounts allowed separate in your mind: discounts allowed are an expense to the business (debited to the Profit and Loss Account) because they represent an amount forgone from customers, while discounts received are the opposite, an income, so they are credited.

Remember that the discount received account is a gain (credit balance) that is transferred to the credit side of the Profit and Loss Account, never to the trading section of the final accounts.