Question

Which of the following is the correct accounting treatment of a trade discount received from a supplier?

-It is recorded as income in the statement of profit or loss.
-It is deducted by the supplier from the list price and the net invoice amount is recorded as an expense and as a payable.
-It is recorded in the cash payments.
-It is recorded in the journal.

Answer 1

A trade discount received from a supplier is deducted from the list price, resulting in a net invoice amount recorded as an expense and payable.

Step-by-step explanation:

The correct accounting treatment of a trade discount received from a supplier is to deduct it by the supplier from the list price, which results in a net invoice amount. This net amount is then recorded as an expense and as a payable in the accounting records.