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what is the difference between cash discount and trade
discount.
what is the journal entry for purchase of 100000 giving
(a) 5% trade discount
(b) 5% cash discount.
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Answer Posted / tanya
Trade discount is allowed when goods ate purchased in bulk or huge quantity. This discount is allowed both on credit as well as cash transactions. Since it is related to purchase and not to the payment.
Cash discount is allowed to the customer for making prompt or early payment. In other words, cash discount is allowed only if the customer makes payment within a fixed period. Such discount motivates the customer to make the payment earliest.
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