We are a producer that sells our products through a distributor to retailers. The distributor orders stock from us and pays us for the order and we post the sale to the income/sales account.. The distributor then sells the products from their stock to retailers. Through the distributor we offer volume discounts to retailers. For example: we sell items to the distributor for $10 each. The distributor sells the product for $20 each to retailers. If a retailer buys 50 items from the distributor the volume discount price to the retailer is $18 per item. The distributor then bills us back for the $2 discount per item, total $100, and we in turn pay back the distributor for the discount. Our question is when we pay back the distributor do we post the $100 dollars payment against the income/sales account or to some other expense account?
