A trade discount is the amount by which a manufacturer reduces the retail price of a product when it sells to a reseller, rather than to the end customer

The company selling the product (and the buyer of the product) will record the transaction at the amount after the trade discount is subtracted. For example, when goods with list prices totaling $1,000 are sold to a wholesaler that is entitled to a 27% trade discount, both the seller and the buyer will record the transaction at $730. There will not be a general ledger account entitled Trade Discount.

By: Munesh Kumari