Cash and Trade Discount

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Discount:

       Discount is of two types namely Cash Discount and Trade Discount.


Cash Discount:- 

        It is offered by the Creditor to his debtor for prompt payment. Cash discount is recorded in the cash-book. This topic is dealt in the cheaper on cash book 📚.


Trade Discount:-

       Trade Discount is an allowance or deduction made in catalogue price or invoice price or list price by the manufacturer or wholesaler to the retailer. The main object of allowing trade Discount is to enable the trader to sell the goods to the consumer at list price and still leaving some margin for meeting his trade Expenses and his profit. Since trade Discount is deducted in the invoice itself, it does not appear in the books 📚 at all. Trade Discount is offered to the trader with reference to the time limit within which supplier expects to receive the payment. Entries are to be made in the Books 📚 of both the supplier as well as retailer on the basis of net amount i.e., invoice price less Discount.

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