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ZIMSEC O Level Commerce Notes: Retail Trade: Trade and Cash discounts

Trade discount

  • a gross deduction from the gross invoice or catalog price
  • given by one trader to another
  • varies with the quantity and type of goods purchased and is deducted at the point of sale
  • usually the rate is high
  • not recorded in the books of accounts
  • encourages customers to buy from a particular source

Cash discount

  • an allowance from the net invoice price given to any customer who pays promptly
  • deducted when the payment is made
  • rate is usually lower than that of Trade discount
  • encourages early payment of debts
  • may increase the rate of stock turn
  • helps reduce the trader’s bad debts
  • saves clerical work due to early payment
  • recorded in the books of accounts

To access more topics go to the Commerce Notes page.