I am an engineer currently pursuing an MBA, and as a result, I have started to delve into some financial issues that are not typically within my area of expertise. I would like to ask a question regarding cash discounts.

Suppose I purchase an item for $1000, and after receiving the goods, I complete the invoicing and payment. The payment terms are "2/10, net 60" (i.e., a 2% discount if paid within 10 days, otherwise the full amount is due within 60 days). We pay within 10 days, so the check amount is $980. My view is that my cost center should be debited $980. However, the actual debit amount shown is $1000. I cannot find where the cash discount is accounted for (if it is accounted for at all).

How do other companies typically handle cash discounts? Should the cost center for the purchased materials receive the discount, or does the discount go to some company-level general ledger account for cash discounts (I may be using incorrect accounting terminology, sorry)? In my opinion, it seems the discount should go to my cost center. If my budget is $1 million and all payments are made within 10 days, then an additional $20,000 per year could be available for other expenditures.

Looking forward to any insights, and I would be very grateful!