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What is a trade discount?

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A trade discount is different from cash discount.It is a deduction from the list price, allowed by wholesalers to retailers.It is deducted in the invoice,from the list price,and only the net invoice price is treated as the value of the purchase or sale.

Features of Trade Discount

  • Trade discount determines the net selling price of every sale.
  • The amount in the invoice are billed net after deducting trade discount.
  • Trade discount is allowed by the wholesaler to the retailer.
  • Trade discount benefited to the retailer allows him to sell the goods to the list price with extra profit.
  • Trade discount may increase or discount the net quantity of buying and its price.
  • Usually trade discount is not accountable. It is a deduction from the list price and the net amount of sale is accounted.

 

Read More : Difference between trade discount and cash discount

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