Discount
A discount is a reduction from a stated amount. In FA, distinguish a trade discount from a settlement discount: a trade discount reduces the list price used to measure a transaction, while a settlement discount depends on payment terms. Correct treatment also depends on whether the business is the buyer or seller and whether the amount concerns inventory, another asset or revenue.
Worked example
A 10% trade discount on a $1,000 list price makes the invoice price $900 before tax; a further 2% settlement discount is $18 if applicable.
Common mistake
Successive percentage discounts are normally applied sequentially, not added: 10% then 2% gives a 11.8% total reduction.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | FA | Supporting | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| FIA | FFA | Supporting | September 2026–June 2027 |