What is Trade Discount & What is the Journal entry for Trade Discount?

Trade Discount : Reduce the seller gives  to the buyer for urging him to purchase or sell to him in large quantities. 

 

So there is no journal entry

IF it is a discount allowed then

P/L Account DR

Party Account DR

 

IF it is a discount received then

Party Account Dr

P/L Account Cr

 

Trade discount not entered in books

Trade discount is basically sales discount and it shows on sales invoice.

Entry

Accounts Receivable      950

Trade Discount                    50

Sales                                          1000

Trade Discount : Reduce the seller gives  to the buyer for urging him to purchase or sell to him in large quantities. 

This discount is not recorded in the books of the seller nor the buyer's books where the goods are recorded value after discount.

So there is no journal entry

Trade Discount is the discount provided on bulk purchases and generally trade discount is not shown in the books of accounts the entry for purchase of10,0005% trade discount is Purchase A/c....Dr9500To Sundry Debtor/cash/bank A/c.9500

It is the reduction in accounts receivable balance when the payment made earlier ( in the discount period ) , also it represents a source of short term financing . The entry at seller books Dr. Cash , Dr. Sales discount , and Cr. Accounts Receivable . And the entry at buyer books Dr. Accounts Payable and Cr. Cash , Cr. Purchases discount .

Absolutely it is caused at the time of sale of goods.

    Journal  Entry is followed

          Discount on Sales...........Dr

          To  Sundry Debtor

The seller would not record a trade discount in the accounting records. Instead, it would only record revenue in the amount invoiced to the customer. If the seller were to record the retail price as well as a trade discount on an invoice to a reseller, this would create an unusually high gross sales amount in the income statement that might mislead any readers of the financial statements into thinking that the manufacturer has higher sales volume than is really the case (despite the presence of a large sales deduction for the trade discount).      Thanks to all of Participate / Friends