A reduction in the catalogue price of an article given by a wholesaler to a retailer is called a?

Assessment: JAMB UTME - Principles of Accounts - 2001 Subject: Financial Accounting

Question 1 Report

A reduction in the catalogue price of an article given by a wholesaler to a retailer is called a?
Answer Details
A reduction in the catalogue price of an article given by a wholesaler to a retailer is called a trade discount. A trade discount is a reduction in the list price of a product or service offered to a customer. It is a common practice used in business-to-business transactions to encourage larger purchases or to establish relationships with customers. In the context of a wholesaler and retailer relationship, the wholesaler may offer a trade discount to the retailer in order to encourage the retailer to purchase more of their products. The trade discount is usually a percentage off the catalogue price of the product. For example, if a product has a catalogue price of ₦1,000 and the wholesaler offers a 10% trade discount, the retailer would only pay ₦900 for the product. The trade discount is not recorded as a separate entry in the accounting records, but is instead reflected in the purchase price of the product. Therefore, the answer is option (B) trade discount.
Read lesson note on Nature And Significance Of Accounting (JAMB)
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