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trade discount and cash discount
Distinguish between Trade discount and Cash discount and explain the m...
Course
Corporate Accounting (BBA234)
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Students shared 24 documents in this course
University
Christ (Deemed To Be University)
Academic year: 2021/2022
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trade discount and cash discount
Course: Corporate Accounting (BBA234)
24 Documents
Students shared 24 documents in this course
University: Christ (Deemed To Be University)
Was this document helpful?
FINANCIAL ACCOUNTING ASSIGNMENT
Distinguish between Trade discount and Cash discount and explain the methodology to
calculate the same with a simple practical example.
Comparison:
Basis of
Comparison
Trade Discount Cash Discount
Meaning Offered by the seller to the buyer as a
reduction in the price of the product
Offered by the seller to the buyer on
the invoice amount at the time of
making payment within the
stipulated time
Purpose of
offering
discount
Ensures bulk sales of the product Ensures proper payment for items
purchased
When it is
allowed
When the purchase is made At the time of payment
Transactions Both cash and credit transactions are
allowed
Only transactions involving cash
payment are allowed
For example:
Question:
If a trader sells goods of the list price of Rs. 20,000 at 10% trade discount and 2% cash discount,
what is the net amount?
Solution:
Rs.
List price 20,000
Less: Trade discount @ 10% 2000
18,000
Less: Cash discount @ 2% (18,000 x 2/100) 360
17,640
Trade Discount practical example:
If a customer purchases 200 books of Rs. 100 each, with a trade discount of 20%.
Total cost of 200 books with discount = 200 x 100 = Rs. 20,000
With trade discount of 20%:
Total cost = Rs. 20,000
