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WHAT IS CASH DISCOUNT & TRADE DISCOUNT?
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Answer / manohar reddy patlolla
Trade discount is a discount that you receive from the
seller at the time of buying goods. (May be because of
buying higher quantity or due to your business relations
with the seller etc...) and the same is deducted or adjusted
in the invoice and you will be paying the net amount only.
Hence it does not go to your accounting books. You will be
Debiting Inventory and Crediting Accounts Payable for the
net amount of invoice you paid.
Whereas, Cash discount is a type of discount that is given
to the debtor (buyer) for making prompt payment.
For example, the Accounts Payable in your books shows a
credit balance of $1,000 that is due after one month. If you
make the payment before the due date, you may be granted a
special discount. Assume you got a discount of $ 100 for
making early payment. The entry will be as follows:
Debit : Accounts Payable $ 1,000
Credit : Bank Account $ 900
Credit : Discount Received $100
| Is This Answer Correct ? | 16 Yes | 0 No |
Answer / sudheer reddy
CASH DISCOUNT:Any amount settled before credit period that
discount allowed or recieved is called cash discount. cash
dicount is recoreded in the books of Accounts
TRADE DISCOUNT: Amount(Discount) allowed or received at the
time of Purchase or Sales, its not recoreded in the books
of Accounts
| Is This Answer Correct ? | 5 Yes | 0 No |
Answer / sadia
Bothe are forms of discount offered or recieved by us.
Only, trade discount is not recorded in books, but cash
discount is.
This means, when make a an entry first deduct trade
discount, the adjusted figure should be entered as cost
price, next record with cash dicount on either side of
petty cash book.
| Is This Answer Correct ? | 3 Yes | 2 No |
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