# Valuation of Inventory is at the price before the percentage discount

Example: item is bought for 2000 with 15% discount. closing stock is recorded at 2000 without deducting the discount

Inventory should be valued at the price you paid for it, including any taxes and freight-in costs, not what you will charge for it. In other words, it is recorded at cost, not value. When sold, the difference will be profit or loss.

I am aware of the fact that the value of Inventory is what you pay for it and not at your selling price. What I want to know is When you purchase Inventory and you are given discount, at what price do you set up such inventory in Manager? Example, Item purchased at 1000 with a discount of 10%. In Inventory setup, do we record say our Inventory price is 1000 or 900.(Note that there is a provision for discount when entry is made for Purchase Invoice)

[quote=“Momodu, post:3, topic:2303”]
I am aware of the fact that the value of Inventory is what you pay for it
[/quote] yes it what you paid for that must be the value if it trade discount.
We have cash discount and trade discount. Trade discount is usually a reduction in the per unit price of an inventory soled because the customer bought a lot or is a loyal customer.
Trade discount is simple, just enter the selling price less discount and that it.

Cash discount on the other hand is a Finance policy by the company. For example instant payment of goods bought attract a 5% discount, payment within one week attract 2% discount.
E.g : Mr A bought one stock of item of £100 and paid immediately for 5% discount.
This kind of discount is recorded in the books like this:

In the books of Mr A

Dr: Purchases 100
Cr: Cash. 95

In the books of the seller
Dr: Cash 95
Dr: Discount allowed
Cr: sales 100

Now assuming Mr A bargained for a trade discount arriving at £90 for the price of the item and paid immediately.

Cash discount will be £90 x 0.05 = 4.5
Now in the books of Mr A

Dr: Purchases 90
Cr: Cash 85.5