Difference Between Cash Discount And Trade Discount

Difference Between Cash Discount And Trade Discount
The main dissimilarities or difference between cash discount and trade discount can be expressed as follows:

1. Meaning

Cash Discount: It refers to the deduction in the debt amount or payment receivables. 

Trade Discount: It refers to the deduction in dealer price or invoice price of goods.

2. Purpose

Cash Discount: To motivate the buyer or debtor for prompt payment.

Trade Discount: It motivate the buyer to purchase in bulk quantity.

3. Source

Cash Discount: Provided at the time of payment.

Trade Discount: Provided at the time of purchase or sale of goods.

 Also Read: 

Difference Between Discount And Rebate

4. Recording

Cash Discount: Recorded in the debit side of cash book.

Trade Discount: No need to record in any books.

5. Provided By

Cash Discount: Creditor to debtor

Trade Discount: Seller to buyer

6. Nature

Cash Discount: It is conditional in nature.

Trade Discount: It is unconditional in nature.

7. Rate Of Discount

Cash Discount: It is almost same in all types of business

Trade Discount: The rate may differ from one business to another.

8. Benefit

Cash Discount: Customer is benefited from cash discount.

Trade Discount: Vendor or supplier is benefited from trade discount.

Cash Discount Vs Trade Discount (Comparison Chart)

Basis For Difference	Cash Discount	Trade Discount
Introduction	Deduction in the payment receivable	Deduction in the invoice price
Objective/Purpose	To influence buyers for quick payment	To influence buyers to purchase in bulk quantity
Time/Source	At the time of payment	At the time of purchase
Record	Debit side of cash book	No recording
Provided By	Creditor	Seller
Provided To	Debtor	Buyer
Nature	Unconditional	Conditional
Beneficial For	Customers	Suppliers

I hope this post is helpful to understand the difference between cash discount and trade discount and to make comparison between them.