TT3 IGCSE Accounting discount

A discount given by one business to another. It is calculated as a percentage reduction on the invoice total.

This is the definition of?

• Trade discount

• Cash discount

A reduction in the amount owing on a credit transaction to encourage prompt payment.

This is the definition of?

• Trade discount

• Cash discount

Paid a cheque to Mary Jones in settlement of our account of $350, less 2% cash discount.

What is the value of the cheque?

Feb 3 Sold goods, $300, on credit to Carla.

Feb 7 Carla returned faulty goods, $50.

Feb 15 Cash sales, $610.

Feb 19 Carla paid the amount owing by cheque, after deducting 3% cash discount.

What was the value of the cheque Carla paid?

Paid a cheque, $441, to Thomas, after deducting a cash discount of 2%.

What was the value of the discount taken?

Received a cheque from Cameran in settlement of his debt of $200 less 3.5% cash discount.

What is the value of the cheque?

Received a cheque, $702, from Thomas, after deducting a cash discount of 2.5%

What was the value of Thomas' debt before discount was deducted?

Transactions for April 2020

Apr 3: The Weaving Shed issued an invoice to Sew and Sew for goods, $510, subject to a trade discount of 20%.

Apr 9: The Weaving shed issued a credit note to Sew and Sew for goods returned, list price $60.

Apr 30: Sew and Sew issues a cheque to The Weaving Shed in settlement of their account, after 2.5% cash discount was taken.

What is the value of the cheque received by The Weaving Shed?

Cash discounts differ from trade discounts.

Trade discounts do not appear in the double entry accounts, but cash discounts do appear.

• True

• False