- Discount is the deduction in the price of the goods sold.
- It is offered in two ways.
- Offering deduction of agreed percentage of list price at the time selling goods is one way of giving discount. Such discount is called ‘trade discount’.
- It is generally offered by manufactures to wholesellers and by wholesellers to retailers.
- After selling the goods on credit basis the debtors may be given certain deduction in amount due in case if they pay the amount within the stipulated period or earlier. This deduction is given at the time of payment on the amount payable. Hence, it is called as cash discount. Cash discount acts as an incentive that encourages prompt payment by the debtors.
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