Question

Trade discount is recorded

• A. In the P&LA/c
• B. In the Balance Sheet
• C. Both in the P&LA/c and Balance sheet
• D. Nowhere

Answer 1

Answer:

D. Nowhere

• A trade discount is a reduction in the list price of goods given by a seller to a buyer — usually for bulk purchases or regular business relationships.

• It is deducted before recording the transaction in the books of accounts.

• That means, goods are recorded in the Purchases or Sales account at the net amount (after trade discount).

• Therefore, trade discount is not shown separately in the Profit & Loss Account or Balance Sheet.

• Trade discount → Not recorded in books (only shown on invoice).

• Cash discount → Recorded in books (appears in P&L Account.