Trade discounts are reductions in the gross selling price of goods or services offered by sellers to buyers and can serve various purposes, such as to be competitive, encourage certain behaviors like early orders, or cater to specific classes of customers according to company policies. These discounts are not recorded as separate line items on the income statement; instead, they reduce the revenue reported.

Solved

Trade Discounts

Question 38

Multiple Choice

Trade discounts

A) apply one or more reductions to the gross selling price for a particular class of customers in accordance with a company's policies.
B) are offered in order to be competitive.
C) are offered to encourage certain customer behavior (to encourage early orders) .
D) are not reported on the income statement
E) All of the above statements are true regarding trade discounts.

Correct Answer: