Example of Trade Discount Received

Example of Trade Discount Received

Trade discount receive is discount received at the time of purchase. The amount of purchases is reduced with the trade discount and purchases are recorded at net amount. Trade discount is not recorded in the books of accounts. Trade discount must not be confused with early payment discount.

Example Trade Discount Received

ABC & Co made purchases of $ 1000 on cash from XYX & Co. Trade discount of 2% on the purchases was given to the ABC & Co. what would be the entry of the transaction

Solution

The purchases will be recorded at $ 980 ($ 1000- $20).

Date	Particulars	Dr	Cr
11 Nov ,2014	Purchases a/c	980
11 Nov ,2014	Cash a/c		980