Loading....
Coupon Accepted Successfully!

 

Trade Discount

Trade discount is an allowance or concession granted by the seller to the buyer, if the buyer purchases goods above a certain quantity or above a certain amount. The amount of the purchase made, is always arrived at after deducting the trade discount, i.e., only the net amount is considered.

 

Example: Amit has a farm where he grows Apples and sells the same to the whole sellers. Price list prescribed by him is ₹. 100 per Kg. Amit offers trade discount of 10% to the wholesaler, if they buy more than 50 kgs. He allows credit period of 30 days. But, if the buyer pays the amount within 10 days he allows cash discount of 1% Various scenarios where trade discount and cash discount is applicable:

 

List Price of Apple per kilogramme is ₹ 100

Scenario

Trade discount (not recorded in the books of account)

Total Cost for buyer

Cash discount
(recorded in the
books of account)

Rachna buys 10 kgs on 1 April and make the payment on 30th April

Not applicable

₹ 1,000

Not applicable

Rahim buys 60Kgs on 1 April and makes payment on 30th April

Applicable

100 x 60 = ₹ 6,000

Less 10% = 600

₹ 5,400

(6000-600)

 

Not Applicable

Swati buys 10 kgs on 1st April and makes payment on 10th April

Not Applicable

₹ 1,000

Applicable

Less 1% on
cost price
= ₹ 10

Utsav buys 50kgs on 1st April and makes payment on 10th April

Applicable

₹ 100 x 50 = ₹ 5000

Less 10% = 500

₹ 4,500

(5,000-500)

Applicable

Less 1% on
cost price
= ₹ 45





Test Your Skills Now!
Take a Quiz now
Reviewer Name