Factoring in trade discounts received when calculating COGS

This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author

Posts
August 2, 2015 at 2:33 pm #264692
accalmz
Member
- Topics: 19
- Replies: 12
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
Liming
August 2, 2015 at 5:13 pm #264744
John Moffat
Keymaster
- Topics: 57
- Replies: 54862
If 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).
Author

Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.