Trade discount
What is a trade discount?
A trade discount is a percentage taken off the list price. The list price is the full price in the seller's price list.
It is given to regular customers and to customers in the same trade. It does not depend on when they pay.
It is taken off on the invoice, before VAT. VAT is worked out on the reduced amount.
Example
Goods have a list price of £400.00. The customer gets a trade discount of 15 per cent, which is £60.00. The net amount on the invoice is £340.00.
Why it matters
Only the reduced amount goes into the books. The list price and the trade discount are shown on the invoice, but they are not recorded in any account.
Practise it
Module, 5 rooms, PremiumInvoices and discounts
See the first roomHow to apply a trade discount
Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].