Question

What is difference between trade discount and cash discount?

Answer 1

Discount is basically referred to as the condition of the price of a bond that is lower than the face value. The discount is equal to the difference between the price paid for and it’s par value. Discount in simpler words is a kind of reduction or deduction in the cost price of a product. It is mainly used in consumer transactions, where people are provided the goods with discounts on various products. The discount rate is mainly on a percentage basis. The discount offers attracts the consumer to buy products.

The difference between a trade discount and cash discount is tabulated below

Context	Trade Discount	Cash Discount
Definition	It can be defined as the discount that is offered on the purchase of goods.	It can be defined as the discount that is offered on making payments.
Records	These sort of trade discounts are not recorded in the accounting book.	This kind of cash discount is recorded in cash book either on debit or credit side depending on discount provided or received.
Purpose	It enhances an increase in sale.	It enhances on-time payment.