Trade Discount Flashcards
What is a trade discount?
A trade discount is a deduction off the list price / retail price / catalogue price of goods and services.
Trade discount = Rate of discount X List Price
Why is a trade discount given?
A business offers a trade discount to encourage its customers to buy in large quantities, and to encourage customer patronage and loyalty.
How is trade discount calculated?
The trade discount is a reduction off the list / retail / catalogue price. The amount less trade discount is the invoiced price.
When is trade discount given?
Trade discount arises at sale of goods or at purchase of goods.
Is the discount recorded in the ledger account?
Trade discount is NOT recorded in the ledger account. The discount shown in the Special Journal is NOT posted to the ledger account. Only the invoiced amount is posted.
