Difference between Cash Discount and Trade Discounts
Basis |
Cash Discount |
Trade Discount |
---|---|---|
Meaning |
A Cash Discount is offered by the seller to the buyer when the buyer is paying the bill. |
Trade Discount is offered by the seller to the reseller during the time of purchase of a product. |
Purpose of discount |
Cash Discounts ensure timely payment for purchased items. |
Trade Discount helps to increase the sales of the product. |
Time when the discount is allowed |
A Cash Discount is offered at the time when the buyer pays the bill amount. |
A Trade Discount is offered at the time when the item is purchased. |
Type of payment allowed |
Cash Discounts are allowed on only transactions related to cash payments. |
Trade Discount is allowed on transactions related to both cash and online payments. |
Motive |
Cash Discount is provided to motivate buyers to pay bills instantly. |
Trade Discount is provided to retain customers and make them future buyers. |
Record of discount |
Cash Discounts are recorded because the amount that the customer pays is calculated after reducing the trade discount. |
Trade Discounts are not recorded in the cash book. |
Difference between Cash Discount and Trade Discount
Cash Discounts and Trade Discounts are often used interchangeably. They are offered to attract customers and increase sales. The main purpose of both discounts is to increase product sales. A Cash Discount is offered by the seller to the buyer when the buyer is paying the bill, whereas, a Trade Discount is offered by the seller to the reseller during the time of purchase of a product.