I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

Trade discounts received should be deducted from the gross cost of purchases. In other words, 

the cost of purchases in the trading account will be stated at gross cost minus discount (ie it will 

be stated at the invoiced amount). 

For example, Company A purchases inventory on credit from Supplier B at a gross cost of $100, 

and receives a trade discount of 5% from the supplier. The double entry for the purchase is as 

follows: 

DEBIT            Inventory 

$95 

CREDIT          Trade payables 

 

$95 

 (b)  Trade discounts allowed should be deducted from the gross sales price, so that sales for the 

period will be reported in the trading account at their invoice value. 

For example, Company B sells inventory on credit to Customer A at a gross sale price of $100 and 

offers a trade discount of 10% to the customer. The double entry for the sale is as follows: 

DEBIT            Trade receivables  $90 

CREDIT          Income 

$90 

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CHAPTER 14  

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  CONTROL ACCOUNTS