In earlier articles, these two terms have been discussed. Tabulated below for easy reference, salient points of the difference/distinction:
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Cash Discount |
Trade Discount |
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Is a reduction granted by supplier from the invoice price in consideration of immediate or prompt payment |
Is a reduction granted by supplier from the list price of goods or services on business consideration re: buying in bulk for goods and longer period when in terms of services |
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As an incentive in credit management to encourage prompt payment |
Allowed to promote the sales |
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Not shown in the supplier bill or invoice |
Shown by way of deduction in the invoice itself |
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Cash discount account is opened in the ledger |
Trade discount account is not opened in the ledger |
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Allowed on payment of money |
Allowed on purchase of goods |
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It may vary with the time period within which payment is received |
It may vary with the quantity of goods purchased or amount of purchases made |