economy

document discount definition

It is called a document discount to that valuation account that represents an unearned interest that is included in the face value of a certain document receivable.

A document discount is a type of valuation account, which has the ability to reflect unearned interest on a document that must be collected. This type of valuation can be amortized over time as interest income.

In certain banking areas there are usually certain documents such as promissory notes or some type of receipt that entail a maturity and that, therefore, imply a difficulty since due to their high cost, their payment can be prolonged in time, damaging the person involved.

In order to avoid this inconvenience, it has been known to create the call discount line. This financial operation allows the bank to advance the payment of the discounts, at the same time obtaining a commission for doing so. If the payment guarantee is high, the risk commission is reduced.

However, an individual or physical entity may not be accepted to benefit from the document discount for various reasons. Either the document may be damaged or it may be a forged copy, or the discount limit has been exceeded and a certain number of documents must be canceled in order to access new discounted amounts. It may also happen that the operation is considered to be of doubtful legality (due to suspicions of money laundering, money laundering or tax evasion). And finally, the person who paid the payment can be found on a list of defaulters that removes the possibility of receiving a discount.

In any case, the bank reserves the right to offer or not this document discount service, or to grant it under the conditions it deems appropriate.

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