Question

What impact does trade discounts have on a company's financial statements?

Answer 1

Trade discount are generally given bu sellers to buyer at the time of sale

Trade discount are not recorded in books only the net sales are recorded in the books of account

If trade discount are also recorded than it will lead to show higher gross sales which will increase gross profit of the business but net profit will be same because trade discount are deducted in order to find net profits.

That is why trade discount are never shown in the books as it will lead to provide inappropriate information to users regarding sales.

As trade discount are never shown and sales are recorded at net it will provide true information to users