Trade discount and Cash discount

Question

Write down the dissimilarity between Trade discount and Cash discount?

Answer 1

- Cash discount is a payment made by retailers to the customers for prompt payment. On other hand, trade discount is an allowance made by the wholesaler dealer to retailers off the catalogue or invoice price. This payment is made between purchasers and sellers engaged in the same class of trade.

- Cash discount is always received or allowed if payment is made. Trade discount allows the retailers to sell the products to customers at catalogue or price list issued through the wholesaler.

- Cash discount is a payment moreover the trade discount made by the seller to the buyer.

- Cash discount is recorded in account books whereas trade discount is not shown separately.

- The major point of permitting trade discount is to allow the retailers to sell the goods at list price whereas the reason of providing cash discount is prompt payment through the debtor to the creditor.