Trade discount is reduced from cost of purchase but cash discount will not be reduced from cost of purchase. As per para 5.7 the Guidance Note on Tax Audit, it has been clarified that cash discount is financial cost & cannot reduced from Turnover, on the principle that interest paid to supplier cannot form part of cost of purchase.
Valuation Of Inventory
Page no : 2
CMA. Rakesh Kataria
(Practising Cost Accountant)
(536 Points)
Replied 30 May 2011
Maneet Puri
(student)
(71 Points)
Replied 04 June 2011
No cash discount should not be deducted for the valuation of inventories.
But trading discount can be deducted for the valuation of the inventories.
But such cash discount will be debited in the profit and loss account.
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