Trade Discount
This is a discount which is allowed by the seller to the buyer on the list
price of the purchased goods. The main objective of this discount is to
increase the sales by encouraging the buyer to make more purchases and
in larger quantities. It can be from a producer to a wholesaler or from a
wholesaler to a retailer or any other relationship having one as the buyer
and the other as a seller.
The discount also aims to retain the buyer for a longer term by giving
them the incentive to make purchases from the buyer again. This
discount is usually deducted from the invoice and therefore is not shown
in the cashbook.
Cash Discount
Credit is a very important aspect of a business. All major business
trepidation is grounded on credit transactions. It is the expectation of the
business and the will of the seller that when goods are sold on credit, the
money is paid back at an early date. For this reason, the seller can issue a
discount to the debtor for paying back the money on an earlier date. This
discount is the one known as the cash discount. The discount is indicated
in the discount column found on the debit side of a cash book of the
seller. However, if you are the debtor who is receiving the discount for
paying pack the credit at an early date, the discount shall appear on the
credit side of the cash book but still in the discount column. The aim of
