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Discussion > Accounts > A/c entries >

Trade Discount Accounting

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[ Scorecard : 25]
Posted On 07 September 2009 at 15:51 Report Abuse

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

[ Scorecard : 5034]
Posted On 07 September 2009 at 16:46

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

Member (Account Deleted)

[ Scorecard : 13290]
Posted On 07 September 2009 at 16:47

No, no entry made for trade discount.

Pulkit Agarwal
CA. Final

[ Scorecard : 450]
Posted On 08 September 2009 at 13:46

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

aurangzaib khan
financial consultant

[ Scorecard : 95]
Posted On 09 September 2009 at 12:26

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.

Raj Singh

[ Scorecard : 47]
Posted On 09 September 2009 at 16:31

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

Chartered Accountant

[ Scorecard : 166]
Posted On 06 July 2012 at 13:26

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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