What is the difference between the trade discount and cash discount?

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Solution

Basis of Comparison Trade Discount Cash Discount

Meaning Discount offered on purchase of goods. Discount for making payment.

Recording in books Not recorded in accounting books Recorded in cash book either on debit or credit side depending on discount provided or received.

Purpose Encourage increase in sale. Encourage on time payment.

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Basis of Comparison	Trade Discount	Cash Discount
Meaning	Discount offered on purchase of goods.	Discount for making payment.
Recording in books	Not recorded in accounting books	Recorded in cash book either on debit or credit side depending on discount provided or received.
Purpose	Encourage increase in sale.	Encourage on time payment.