Mathematics and Statistics · Ch 18 — Commercial Mathematics
Discount — Trade Discount and Cash Discount
Discount — Trade Discount and Cash Discount
Sellers advertise a list price (also called the marked price, MP, or catalogue price) and then reduce it. There are two distinct reductions, applied in a fixed order.
Trade discount and cash discount
- Trade discount — a reduction on the list (marked) price, allowed to a buyer (often a retailer) at the time of sale. It never appears in the account books; the invoice is drawn for the reduced amount.
- Cash discount — a further reduction on the invoice price, allowed for prompt or early payment.
Order matters: trade first, then cash
The two discounts are successive, not additive
Trade discount is computed on the list price; cash discount is then computed on the already-reduced invoice price — not on the original list price. So a trade discount followed by a cash discount is not a flat :
Successive discounts of then …
The catalogue/tag price before any discount — the base on which trade discount …
A reduction on the list price at the time of sale; the invoice is made for . It is not recorded …
A further reduction on the invoice price for prompt payment; amount paid . Applied after, and o …