Does your business regularly offer sale or cash discounts to customers who pay early on their invoices for goods and services? If so, it's a good idea to set aside a reserve fund to cover these sales discounts, The amount of this discount reserve should be based on your estimate of the likely total figure for discounts that will be taken.

As customers actually take the discounts, credit the accounts receivable account for the amount of the discount and debit the sales discount reserve. This way the discount is clearly in the same period as the associated invoices, so it is easier to account for all aspects of the sale transaction.