What is trade discount .How is it different with cash discount?

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Solution

Trade discount is allowed by the seller when the purchases are made in bulk.

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

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Similar questions

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

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Sold goods for cash of Rs 4000 on 10% Trade discount & 10% cash discount. Posting in discount account will be?

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