How to Make a Journal Entry for an Employee Discount
Many businesses offer discounts to employees for products and services that the business provides. Employee discounts are considered an expense of doing business and are an allowed deduction when filing federal taxes for the business. While employee discounts could easily be recorded on the accounting books as a reduction in the pricing of the product or service, that method would understate actual sales figures for the product or service. Instead, you should record a separate journal entry for employee discounts in the accounting records.
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Instructions
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Create an account called "Employee Discounts" in the "Income" section of the general ledger. The "Employee Discount" account will be a "contra-income" account in that it will reduce total income on financial statements by the amount of the discount.
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Record the full retail price of the sale of the product or service to an employee as an increase (credit) to the product or service "Income" account.
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Record the amount of payment received for the sale as an increase (debit) to the checking account or other depository account.
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Record the difference between the retail sales price and the amount of payment received as an increase (debit) to the "Employee Discounts" account.
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Tips & Warnings
If you're not certain how to record employee discounts, consider hiring an accounting professional to assist you.
