Discounts?

E=mc2
E=mc2 Registered Posts: 12 New contributor 🐸
in AAT Level 3 (Level 6 in Scotland)
Can anyone help me to explain the difference between cash dicsount and trade discount? Im struggling to put it into words...!
Having a real hard time getting my brain to work today!

Comments

  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034 mod
    I imagine you are a foundation student as this is an important distinction in unit 1.
    If the custome pays within the requisite period he or she is entitled to the cash discount (as per your terms of business)
    If the customer is one that is buying in large quantities then your sales dept may have agreed a discount this would be a trade discount.

    As you can imagine some customers may benefit from both trade and cash discounts if they are trade customers who pay within the time limits set.
    Sandy
    sandy@sandyhood.com
    www.sandyhood.com
  • sarahwilson
    sarahwilson Registered Posts: 567 Epic contributor 🐘
    Trade discount is money off the usual selling price for purchasing a large quantity or simply being a trade customer. Eg a plumbers merchants may well sell to both general public and trade. A toilet to the general public may be £50.00 but to a plumber (who will sell it on to a member of the public when he fits it) it may be £30.00. If he buys 10 toilets he may pay £20.00 each.

    Settlement discount is offering a % off the invoice total if they pay within the time limit you specify eg 14 days.

    The difference is that trade discount does not need to be accounted for its merely a reduction of the normal price.

    Setlement discount must be accounted for if it is claimed in time.

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