What Is the Difference Between Cash Discount and Trade Discount

Define Cash Discount & Trade Discount

Cash Discount is a type of discount given by the supplier or seller to the buyer to receive prompt payment.

Trade Discount is a type of discount given by the seller to the buyer from the list price allowed by the wholesaler to the retailer.

Difference between Cash Discount & Trade Discount

Cash Discount

Trade Discount

Cash Discount Account is opened in the ledger. Trade Discount account is not opened in the ledger.
Cash discount is granted by the supplier in the consideration of instant payment. Trade Discount is granted by the supplier from the list of goods or services on consideration of business.
It is allowed on payment of money. It is allowed on purchase of goods.
It is not shown in the invoice. It is shown by the way of deduction in the invoice.
It encourages prompt payment. It is allowed to encourage the sales.
This discount varies with the time period within which payment is received. This discount varies with the quantity of goods purchased.