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Trade Discount Accounting

ACCOUNTS EXECUTIVE


We are giving Trade discount to our customer. We we shows as follows in our invoice

Basic Amount                            100

Less Trade Discount                   5

Net Sales                                      95

VAT 5%                                            5

Total Amount Rs.                         100

We are showing the discount seperatly in our Invoice. Is it correct ? The separate ledger maintained in COA for Trade Discount, Is is correct? Please guide 

 
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Asst Mgr-Finance


what is your querry maintaing the ledger for trade discount it comes on debit of p&l and sales is inclusive of dicount comes in credit of Trading.Trade Disount is is a usual trade practice which must be shown  necessarily on the body of the invoice else you cannot be  able to get the vat benefit if it is issued by way of credit note to dealers

 
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No, no entry made for trade discount.

 
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Trade discout Should not be conceptually recorded in the books. You are treating it as a cash discount

 
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financial consultant


As per normal accounting practice, Trade discount only allow in respect of total selling price. hence it shown on invoice for calculation purpose only. No accounting treatment require.

 
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Trade discout is not shown in the books usually only the cash discount is considered but however you have done it you have to make proper accounting treatment in the books.

For Eg. You have to record u r Gross sale value as rs 100 in the books and there u have to deduct the Trade discount of rs 5 so that u r net sales in the profit & Loss account would result to Rs 95.

 


Total thanks : 1 times

 
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Chartered Accountant


No entry is made for trade discount

as it is allowed while selling the goods

though cash discount is recorded in books and shown in debit of p&l

because it is allowed while making collection.

 
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Kindly clarify me the following heads comes under Trading a/c or P & L A/c.

Trade Discounts 

Scheme Discounts

or any other Discounts

 
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Article Assistant


Trade discount is not recorded in books.only manufacturer records trade discount as an expense and maintains seperate ledger....

 
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Article Assistant


Trade discount is not recorded in books.only manufacturer records trade discount as an expense and maintains seperate ledger....

 
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