How is the trade discount different from the cash discount?
How is the trade discount different from the cash discount?
The differences between trade discounts and cash discounts are:
TRADE DISCOUNT
CASH DISCOUNT
Trade Discount is deducted from the invoice value or catalog price of the goods.
Cash Discount is deducted from the invoice value of goods
Trade Discount is a subtraction from the list price of the goods, allowed by the trader to the customer at an agreed rate.
Cash Discount is a discount allowed to the customer, when he/she makes cash payment of the goods purchased, within the stipulated time.
Trade Discount is not specifically shown in the company’s financial books, and all the transactions are entered in the purchases or sales book in net amount only.
Cash Discount separately appears in the financial books, as an expense in the Profit and Loss Account.
Trade Discount is based on the amount of purchase or sales, i.e. the more the sales, the more will be the rate of discount.
A Cash Discount is based on time, i.e. the earlier the payment is made by the debtor, the more will be the cash discount allowed.
Trade Discounts are allowed on both cash and credit transactions.
A Cash Discount is allowed to the customers only on cash payments.
Trade Discount is always provided to the customer in a fixed percentage.
The percentage of Cash Discount may or may not be fixed.
Trade Discount is provided to increase sales in bulk quantity.
Cash Discount is given to the customers to encourage early and prompt payment.
Trade Discount is allowed to the customers because of business considerations like trade practices, bulk orders, etc.
Cash Discount acts as an incentive or motivation for stimulating payment within the specified time.
The differences between trade discounts and cash discounts are:
|
TRADE DISCOUNT |
CASH DISCOUNT |
|
Trade Discount is deducted from the invoice value or catalog price of the goods. |
Cash Discount is deducted from the invoice value of goods |
|
Trade Discount is a subtraction from the list price of the goods, allowed by the trader to the customer at an agreed rate. |
Cash Discount is a discount allowed to the customer, when he/she makes cash payment of the goods purchased, within the stipulated time. |
|
Trade Discount is not specifically shown in the company’s financial books, and all the transactions are entered in the purchases or sales book in net amount only. |
Cash Discount separately appears in the financial books, as an expense in the Profit and Loss Account. |
|
Trade Discount is based on the amount of purchase or sales, i.e. the more the sales, the more will be the rate of discount. |
A Cash Discount is based on time, i.e. the earlier the payment is made by the debtor, the more will be the cash discount allowed. |
|
Trade Discounts are allowed on both cash and credit transactions. |
A Cash Discount is allowed to the customers only on cash payments. |
|
Trade Discount is always provided to the customer in a fixed percentage. |
The percentage of Cash Discount may or may not be fixed. |
|
Trade Discount is provided to increase sales in bulk quantity. |
Cash Discount is given to the customers to encourage early and prompt payment. |
|
Trade Discount is allowed to the customers because of business considerations like trade practices, bulk orders, etc. |
Cash Discount acts as an incentive or motivation for stimulating payment within the specified time. |
