How to Calculate a Trade Discount

by Carter McBride; Updated September 26, 2017
Invoices will show the actual cost of the product net of any trade discount.

A trade discount is similar to a sales discount in that the purchaser can buy a product for less than the list price of the product. Companies usually give trade discounts to other companies that buy often or buy large amounts of products. Normally, a trade discount is presented as a percentage off of the list price. For example, a trade discount would be 10 percent off the list price.

Step 1

Determine the list price of the object. For example, Company A is selling widgets for $500,000.

Step 2

Determine the trade discount percentage. For example, Company B wants to buy the $500,000 widgets and has always been a good customer to Company A so Company A offers a trade discount of 10 percent to Company B.

Step 3

Multiply the price by the trade discount percentage to determine the amount of the trade discount. In our example, 10 percent of $500,000 equals a trade discount of $50,000.

Step 4

Subtract the trade discount from the selling price to determine the selling price net any trade discounts. In our example, $500,000 minus $50,000 equals a net selling price of $450,000.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

Photo Credits

  • Blue pen in front of invoice image by millann from Fotolia.com