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In my opinion, there is no good reason why a sales discount should be ignored when estimating inventory at the end of the relevant period.
Fortunately there are excellent informative systems that allow the companies to take into consideration the average sales discount practiced before (until the evaluation moment) and it would not be so difficult to include this parameter within the estimating process.
A sales discount is a reduction in the price of a product or service that is offered by the seller, in exchange for early payment by the buyer. Sales returns and allowances are considered as proper adjustments to gross sales; sales discounts, however, are not recognized when sales are recorded gross. To adjust for the sales discount account in such a situation would provide an ending inventory figure at retail that would be overvalued.
When we purchase in bulk, we are usually offered a discount. Sometimes we get a discount if we make the payment in advance.
These discounts are offered on order to order basis only and don affect the standard costs of material therefore get missed during inventory estimation.
The inventory gets estimated at a higher price than it actually is.
