Trade Discount

Q: Purchased merchandise on credit for R500 subject to trade discount of 20%... What journals must I use?


A:
DR: Purchases R400
CR Creditors R400.

That's all. You don't record trade discounts as a separate entry of R200, you just net the amount and show the final figure (R400/R500 = 80% or the final figure after 20% discount).

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