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Trade Discount Accounting

K Vinod (ACCOUNTS EXECUTIVE) (25 Points)

07 September 2009

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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10 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 07 September 2009

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

(Guest)

No, no entry made for trade discount.

Pulkit Agarwal (CA. Final) (455 Points)
Replied 08 September 2009

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

aurangzaib khan (financial consultant) (95 Points)
Replied 09 September 2009

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 (Accountant) (47 Points)
Replied 09 September 2009

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.

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