ACCA Applied Knowledge · Financial Accounting · Sales and purchases
Under IFRS 15, how should a supplier treat a trade discount given to a customer on a credit sale invoice?
Revenue and the receivable are recorded at the price net of the trade discount, and no separate discount account is used. A trade discount is simply a lower agreed selling price, unlike a settlement discount for early payment, which is recorded separately.
- ARecord revenue at the invoice price after deducting the trade discount, with no separate discount accountCorrect
- BRecord revenue at list price and debit the discount to discount allowed
- CRecord the discount as a finance cost
- DRecord the discount as other income when the invoice is paid
Explanation
A trade discount is a reduction in the price agreed at the point of sale, so revenue and the receivable are recorded net of it. It is not entered in the ledger accounts as discount allowed, which is used for settlement discounts for early payment.
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