Trade Discount Vs Cash Discount

trade discount is one that is allowed by the wholesaler to the retailer, calculated on the list price of the product, whereas cash discount is allowed to stimulate instant payment of the goods purchased. The main difference between trade discount and cash discount is that ledger account is opened for a cash discount, but not for a trade discount.

CASH-DISCOUNT-VS-TRADE-DIS

Trade Discount Vs Cash Discount

BASIS FOR COMPARISON TRADE DISCOUNT CASH DISCOUNT
Meaning A discount given by the seller to the buyer as a deduction in the list price of the commodity is trade discount. A deduction in the amount of invoice allowed by the seller to the buyer in return for immediate payment is cash discount.
Purpose To facilitate a bulk sales. To facilitate a prompt payment.
Invopice It is shown in invoice as a deduction itself. It is not shown in invoice.
When allowed? At the time of purchase. At the time of payment.
Allowed to all customers Yes No
Entry in books No Yes
Vary with Time period, when payment is made. Quantity of goods purchased or amount of purchases made.

Leave a Reply

Your email address will not be published. Required fields are marked *