Distinguish between Trade Discount and Cash Discount.

Exercises · Q7

Q. Distinguish between Trade Discount and Cash Discount.

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Basis	Trade Discount	Cash Discount
When given	At the time of sale/purchase, usually to encourage bulk buying or as a dealer's margin	At the time of payment, to encourage prompt settlement of a debt
Shown on invoice?	Deducted directly on the face of the invoice — the net amount alone is billed	Not shown on the invoice; calculated separately when payment is made
Recorded in books?	Never recorded separately — purchases/sales are recorded net of trade discount	Always recorded — as Discount Allowed (an expense, for the seller) or Discount Received (an income, for the buyer)
Depends on	Quantity/value of goods bought	Period within which payment is made

Q.Distinguish between Trade Discount and Cash Discount.