How to catagorize a Customer Discount - Income or Expense?

It's good to hear that you can now recognize your account discrepancies, @victoriah1956.

Let me help you set up a customer discount and place it in the correct account.

We should add the customer discount to the Item List. Here's how:

1. Click the Lists section above.
2. Select Item List.
3. On the bottom part, click the Item dropdown. Choose New.
4. Tap the Type field. Then, select Discount.
5. Enter an amount in the Amount or % field.
6. Tap the Account tab and select the one where you'll categorize it. 
7. Once done, tick OK to save.

For additional info, you can read this article: Use discount and subtotal items on an Invoice.

Concerning categorizing customer discounts, you can place them in the expense account. However, I recommend contacting your accountant to categorize your accounts to avoid discrepancies in your book.

You might want to personalize your customer transaction reports to show discounts, check out this article:  Customize reports in QuickBooks Desktop.

I'm just a reply away if you have additional questions about categorizing transactions. I'll be willing to help. Have a good day.

@victoriah1956 

Sales discounts should be a reduction in income, not an expense.  The bottom line is the same either way but, you are not incurring an expense when providing a discount, you are reducing your revenue.