Accounts Payable-How do I handle the discount taken?

I am new at an A/P position and am not sure how to handle the discount taken for prompt payment of invoices (2/10, net 30). If the invoice is for $100
and it gets paid before the 10 days are up...what is the proper way of recording it/processing it? Accounts Payable-Debit $98, where does the $2 discount get recorded? There is no record that the prior A/P person recorded any discounts.
Share your knowledge and give me some advice.
Thank you all that respond. Jack
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The proper way always gets overruled by the way the boss wants it done.

Credit the full $100 to the client (else they get PO'd), Debit the $98 cash received to the bank (cause that's what you got), and Debit an expense account called "Discounts" or some such nonsense. That's the nuts and bolts of it, but there may be a function through your AR program that allows you to book the discount (sending it to the expense account). Then you can run a report of who takes the discount.
--
Paul A. Thomas, CPA
Athens, Georgia
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Paul,
Looks to me like the OP was TAKING a discount upon paying a vendor.
Jack,
If this is the case, you would debit the A/P account for the full amount and credit cash for the amount you actually paid and credit a purchase discounts account for the difference. Oftentimes, software will allow you to choose an additional credit account whether that be for credit memos or purchase discounts.
On Tue, 26 Dec 2006 19:39:43 -0500, "Paul Thomas"

Beverly
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Hmm.....I didn't look at it that way, but you may be on target.
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Paul Thomas, CPA
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