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Trade discount is referred to as the discount that is offered by a seller to the buyer of the product in the form of reduction in the price of the item.Trade discounts are offered to increase the sales of the product and make the customers feel that they are getting the best offer. No accounts are maintained for keeping track of the discounts that are offered.
Trade discount is a deduction given by the supplier to the buyer on the list price or catalogue price of the goods. It is given as a trade practice or when goods are purchased in large quantities. It is shown as a deduction in the invoice. Trade discount is not recorded in the books of accounts. Only the net amount is recorded.
A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based on each customer\’s volume or status.