DIFFERNCE BETWEEN CASH DISCOUNT AND TRADE DISCOUNT :
Cash Discount | Trade Discount |
(i) It is a reduction granted by a supplier from the invoice price in consideration of immediate or prompt payment. | (i) It is a reduction granted by a supplier from the list price of goods or services on business consideration. |
(ii) It is allowed to encourage the prompt payment. | (ii) It is allowed to promote sales. |
(iii) It is not shown in the invoice | (iii) It is shown by way of deduction in the invoice itself. |
(iv) Cash discount account is opened in the ledger. | (iv) Trade discount account is not opened in the ledger. |
(v) It is allowed on payment of money | (v) It is allowed on purchase of goods |
(vi) It may vary with the time period within which payment is received | (vi) It may vary with the quantity of goods purchased or amount of purchases made. |