What are cash discount and trade discount?
Answers
A discount given by the seller to the buyer Aise deduction in the list price of 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.
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Answer:
Cash Discount :
Cash Discount is allowed by a trader to another trader or to a customer who makes immediate payment for payment during a prescribed period at a fixed payment . It is allowed in addition to trade discount.
Cash Discount is recorded in the books of account and entry is passed.
Cash discount = ( Marked or List Price - Trade Discount ) × % of cash discount ÷ 100
Trade Discount :
Trade Discount is the discount allowed by the manufacturer's to the wholesalers and retailers or by wholesalers to retailers. It is allowed to everybody who buys goods for cash or credit . It is not connected with the payment.
Trade Discount is not recorded in the books of account . It is also not shown in the cash book this discount is deducted from the invoice value are listed price of goods at a fixed percentage.
Trade discount = ( Marked or List Price × % of Trade Discount ) ÷ 100
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Explanation: