Mathematics and Statistics · Ch 9 — Commission, Brokerage and Discount
Trade Discount and Cash Discount
Trade Discount and Cash Discount
Manufacturers and wholesalers print a list price (also called the catalogue price or marked price, M.P.) on their goods. They rarely sell at this price to dealers; instead they allow reductions called discounts. Two different discounts must not be confused.
A trade discount is a reduction on the list price allowed to a retailer or dealer, chiefly so that the dealer can resell at the list price and keep the difference as profit. It is deducted first, and the amount left is the invoice price (the price actually charged on the bill).
Invoice price after trade discount
A cash discount is a further reduction allowed for prompt payment (paying immediately or within a short agreed period). Crucially, it is calculated on the invoice price — that is, on the amount remaining after the trade discount, never on the original list price.
Amount paid after cash discount …
The catalogue or printed price of an article before any discount …
, a reduction on the list price allowed to a dealer; the list price minus this discoun …
The price actually charged on the bill, equal to the list price less the trade discount; the cash discount is com …
, a further reduction allowed for prompt payment, calculated on the invoice price …