Trade Discount

This is the deduction of the price of the goods and is sometimes deducted in the purchases book. It is a deduction allowed by a seller to a buyer if the buyer decides to buy in large quantity. A seller may decide to give a discount to any person that can buy goods at a stated quantity over a given period. This type of discount is known as trade discount. It is quite different from cash discount. This is because cash discount is made after sale, that is during payments. But trade discount is made during or before the sales. This is because it will be deducted in order to help us determine our net selling price.

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