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

PART E: PREPARING A TRIAL BALANCE 

 

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2.1.1 Examples of trade discount 

(a) 

A customer is quoted a price of $1 per unit for a particular item, but a lower price of 95 cents per 

unit if the item is bought in quantities of 100 units or more at a time. 

(b) 

An important customer or a regular customer is offered a discount on all the goods the customer 

 

buys, regardless of the size of each individual order, because the total volume of the customer's 

 

purchases over time is so large. 

A cash discount 

(or 

settlement discount

) is a reduction in the amount payable to the supplier, in return 

for immediate payment in cash, or for payment within an agreed period.  

 

For example, a supplier charges $1,000 for goods, but offers a discount of 5% if the goods are paid for 

immediately in cash. Alternatively, a supplier charges $2,000 to a credit customer for goods purchased, 

but offers a discount of 10% for payment within so many days of the invoice date. 

2.2 Accounting for discounts