Concept:A discount deducted from the list or catalogue price before any payment is made is a trade discount.
Explanation:The
5% discount shown above is a reduction on the list price of the goods sold, not on the amount actually paid in cash.
Trade discount is given by a seller to a buyer, often for bulk purchase or to encourage trade customers.
It is calculated before the invoice is recorded in the books, so it does not appear in the discount allowed or discount received accounts.
A cash discount is given only when payment is made quickly, while discount allowed and discount received are recorded in the ledger.
Because the
5% is applied directly to the price of the goods, it represents a trade discount.
Answer:A. Trade discount
