Trade Discount Definition:

Trade discount is an allowance or rebate from the scheduled price granted by the seller to buyer. In other words, Trade discount is an allowance made from the full invoice price to a customer who buys goods in the ordinary course of trade. For example, a whole seller nay invoice goods to a retailer at the retail selling price less a discount of 25%; which represents the retailer’s gross profit.

The deduction of trade discount is made on the invoice and only the net amount is entered in the purchase journal and stock records.