What Are Cash Discount And Trade Discount And Their Difference?

• What are cash discounts?

Cash discounts are given to customers who pay with cash. A discount is sometimes given for people who pay with cash because some businesses charge for the use of credit or debit cards. It is often considered to be an illegitimate deal if cash is paid for a product because it may mean that a business is not putting the purchase through the books and is therefore avoiding paying tax. Some people prefer to pay cash so that they can keep track of the purchases they make. Cash discounts are also given to customers who pay for their products immediately. Some businesses will have the option for a purchase to be paid for in a month's time or possibly even longer. This is to encourage customers to buy things that they may not normally buy when they have to pay the entire sum immediately. Providing cash discounts encourages people to pay as soon as they can.

• What are trade discounts?

Trade discounts are given to people who are purchasing goods from a company to carry out work of their own company. Trade discounts are usually given because traders will often spend large amounts of money and will return for business again and again so both businesses benefit from the arrangement. They are both trying to encourage loyalty with one another.

• Why give cash and trade discounts?

Cash and trade discounts are given to encourage loyalty and a reason for the customers to return again and again. Many businesses like to give them because it gives them an edge over their competition and the loyalty that it inspires in customers can make them feel special and more likely to return.

Trade discount is given when the goods are purchased.Trade discount is not shown in the books of Accounts.

Cash Discount is the discount given when payment is made to supplier. Cash discount is shown in the books of accounts.