Acca financial Accounting (FA) Study Text ac ca (FA)

3 Discounts 

Trade discounts 

Trade discounts are given to try and increase the volume of sales made by the 

supplier. By reducing the selling price, buying items in bulk then becomes more 

attractive. If you are able to source your products cheaper, you can then either 

earn more profit on each item you sell, or you can reduce your selling price to 

make your goods more commercially attractive to customers. For example, if 

you were to buy over 1000 items, the supplier might be able to reduce the price 

of those items by 5%. 

Accounting for trade discounts 

From an accounting perspective, trade discounts are deducted at the point of 

sale. When accounting for a sale that is subject to a trade discount – it is the net 

amount that should be recorded i.e. the trade discount does not get recorded 

separately. 

 

 

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