Trade Discount
Definition
A reduction off the list price given to a buyer, usually for volume or trade status, deducted before the invoice is raised. It is not recorded separately in the books because the invoice is already net of it.
Related Terms in Core Accounting
Cash Discount
A reduction offered to a customer for paying within a set time. Unlike a trade discount, it is recorded in the books because it affects the amount actually received against the invoiced total.
Outstanding Expenses
Expenses that relate to the current period but remain unpaid at its end, recorded as a liability so the cost is matched to the right period. They are a form of accrued expense.
Contingent Liability
A possible obligation that depends on an uncertain future event, such as a pending lawsuit or guarantee. It is disclosed in the notes rather than recorded, unless payment becomes probable and measurable.
Provision for Doubtful Debts
An estimate of receivables unlikely to be collected, charged as an expense and set against the receivables balance. It applies the prudence principle so assets and profit are not overstated.
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