Trade discount and Cash discount

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Answer Solution: Trade Discount:  Trade discount is a discount on the selling price for bulk purchase or for purchasing above a minimum quantity or is offered generally to regular customers.  It is also called quantity discount.  This is a technique of sales promotion.  It is generally determined at the stage of sale itself & is deducted from the sale/purchase value & hence doesn't appear separately in the Books of account & Final A/ cs. Cash Discount:  Cash discount is the discount offered by the supplier in consideration of early or timely payment.  It may vary with the period of payment.  It is accounted as a separate item & appears in the Profit & loss a/ c.  Cash discount is usually given at the time of payment/ receipt as against trade discount is given at the stage of sale/purchase.

Trade discount and Cash discount

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