Question

An allowance given by receiver of the cash to the giver of cash at the time of payment is known as _____________ .

• A. Cash Discount
• B. Credit Discount
• C. Trade Discount
• D. Quality Discount

Answer 1

The correct option is A Cash Discount

Discount is the deduction in the price of the goods sold. It is offered in two ways. Offering deduction of agreed percentage of list price at the time of selling goods is one way of giving discount. Such discount is called 'trade discount'. It is generally offered by manufacturers to whole sellers and by whole sellers to retailers. After selling the goods on credit basis the debtors may be given certain deduction in amount due in case if they pay the amount within the stipulated period or earlier. This deduction is given at the time of payment on the amount payable. Hence, it is called as cash discount. Cash discount acts as an incentive that encourages prompt payment by the debtors.