What is difference between trade discount and cash discount?

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Solution

Basis of Difference

Trade Discount

Cash Discount

Meaning

It is allowed when goods are purchase or sold.

It is allowed at the time of payment.

Recording in books

It is recorded in invoice/bill but not in the books.

It is recorded in the discount column of the Cash Book’s debit side, if allowed, and credit side, if received.

Purpose

It is allowed to increase sale.

It is allowed for earlier payment.

Deduction

It is deducted from the price-list of the goods.

It is not deducted from the price-list of the goods.

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Basis of Difference	Trade Discount	Cash Discount
Meaning	It is allowed when goods are purchase or sold.	It is allowed at the time of payment.
Recording in books	It is recorded in invoice/bill but not in the books.	It is recorded in the discount column of the Cash Book’s debit side, if allowed, and credit side, if received.
Purpose	It is allowed to increase sale.	It is allowed for earlier payment.
Deduction	It is deducted from the price-list of the goods.	It is not deducted from the price-list of the goods.