Difference between Cash Discount and Trade Discount

Nov 30 -0001

Distinguish, differentiate, compare and explain what is the difference between Cash Discount and Trade Discount. Comparison and Differences.

Differences between Cash Discount and Trade Discount

S.No.	Cash Discount	Trade Discount
1	In cash discount method buyers are allowed to make payment at an early date.	In trage discount, encourages buyers to buy goods in larger quantities.
2	Cash discount is more related to time. Earlier the buyer do payments more will be the cash discounts in favour.	Trade discount is generally related to the quantity of purchase or sale. More the buyer purchases, more will be the deduction rate and amount of discount.
3	Cash discount is allowed by the seller or creditor to the buyer or debtor at the time of making payment.	Trade discount is allowed by the seller to the buyer when the goods are sold.
4	Cash discount is recorded in the books of account.	Trade discount is not recorded in the books of account.
5	It is shown in the debit side of the cash book.	No journal entry is made for it.
6	Cash discount received is shown on the credit side of the cash book.	Its details are just shown in the purchases or sales book.
7	Cash discount is not deducted from the invoice value of goods.	Trade discount is deducted from the list price of the goods.