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Wht is the differance between Trade discount and cash
Discount?
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Answer Posted / ukthika fernando
Cash Discount
Trade Discount
Is a reduction granted by supplier from the invoice price in
consideration of immediate or prompt payment
Is a reduction granted by supplier from the list price of
goods or services on business consideration re: buying in
bulk for goods and longer period when in terms of services
As an incentive in credit management to encourage prompt payment
Allowed to promote the sales
Not shown in the supplier bill or invoice
Shown by way of deduction in the invoice itself
Cash discount account is opened in the ledger
Trade discount account is not opened in the ledger
Allowed on payment of money
Allowed on purchase of goods
It may vary with the time period within which payment is
received
It may vary with the quantity of goods purchased or amount
of purchases made
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