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Dear sir,
Since the following equation holds true for calculating COGS:
Opening Inventory + Purchases – COGS = Ending Inventory
When trade discounts are received, shall I minus trade discounts received as shown in the equation below?
Opening Inventory + Purchases – Trade discounts received – COGS = Ending Inventory
And is the following true for calculating trade payables when there are trade discounts recieved?
Beginning Trade payable + Purchases – Trade discounts received – Payment to suppliers (either by cash or via bank) = Ending Trade payable
Thanks
LimingIf there is a trade discount, then the amount on the invoice (and the amount recorded in purchases) is the amount after subtracting the trade discount.
There are no separate entries for trade discounts.I really do suggest that you watch the free lectures – they comprise a complete course for Paper F3 and cover everything you need to pass the exam well (including how to deal with discounts).
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