Final answer:
Trade discounts are recognized by recording the sale at the discounted price, directly reducing the revenue reported on financial statements without a separate account.
Step-by-step explanation:
Trade discounts are typically recognized by recording the sale at the discounted price. This means that when a company sells products or services, any trade discount offered is subtracted from the list price before recording the revenue. There is no separate account for trade discounts; rather, the revenue reported on the financial statements is the net amount after the trade discount has been applied.
The option of using a contra revenue account does not apply to trade discounts directly, though it may be related to sales returns and allowances. Trade discounts are not recorded as separate transactions or in their own account (like a Trade Discounts account or by reducing them from total revenues at the end of the period). Thus, the correct answer to how trade discounts are recognized is B) By recording the sale at the discounted price.