Trade Discount & Cash Discount

1. What is a trade discount?

• A. A discount given to promote quick payments
  
  
  

• B. A discount allowed for purchasing in bulk

• C. A discount shown in the books of accounts

• D. A penalty charged on delayed payment

2. Trade discount is allowed:

• A. After recording the transaction in the books

• B. Before recording the transaction in the books

• C. At the time of payment

• D. Only on credit sales

3. Cash discount is allowed to the buyer when:

• A. Goods are purchased in bulk

• B. Payment is made after due date

• C. Payment is made within the stipulated time

• D. Goods are returned

4. Which one of the following is not true about trade discount?

• A. It is not recorded in books

• B. It is shown in the invoice

• C. It is allowed to promote early payment

• D. It reduces the list price

5. Cash discount is recorded in the books of accounts as:

• A. It is not recorded

• B. It is recorded after calculating net payment

• C. It is recorded along with trade discount

• D. It is added to the invoice