Question

Give one example each for trade discount and cash discount.​

Answer 1

Answer:

Firstly, the discount allowed on the list price of the goods, i.e., 10% of $8000 = Rs. 800 is a trade discount, which will not be recorded in the books of accounts. Next, the discount received by Mr. X of $500 for making the immediate payment is a cash discount, and it is allowed on the invoice price of the goods.

Answer 2

Answer:

Example of Trade and Cash Discount

Amount payable as per invoice = $2,25,00,000. Cash discount = 3% = 3% * 2,25,00,000 = $6,75,000.