Cash Discount

A discount which is allowed by seller to buyer at the time of payment of credit purchases is called cash discount.

For example: Aslam purchase a book from Asif on credit for Rs. 1000, on the condition that he will make payment after 2 month, Asif (seller) give chance to buyer if he make payment in one month then discount will be allowed at the rate 10%. Aslam make payment before one month.

Discount= 1,000 x 10/100 =100

Aslam will record Rs. 100 as discount receive and Rs. 900 for payment.

Types of Cash Discount

Ø  Discount Allowed

Ø  Discount Received

Trade Discount

A discount which is allowed by seller to buyer on list price (Written Price) of goods at the spot of selling is called trade discount. Trade discount is not recorded in accounting record.

For example: If the price of book is Rs. 100 and the seller allowed a discount at the rate 10% then the price of book will Rs. 90. So trade discount will not be recorded.

Discount= 100 x 10/100 =10   Price of Book = List Price – Discount = 100 -10 = 90

Sale Return / Return Inward / Return to Seller

Goods return by customer is called Sale Return/ Return inward/ Return to Seller. Return of goods may be due to defective or over sale or any other reason.

For example: Goods (Computers) returned by customer of Rs. 10,000.

Credit Sale

Sale of goods on account/ Credit are called credit sale.

For example: Aslam sold Computers on the condition that he will receive the amount Rs. 50,000 after 2 months.

Cash Sale

Sale of goods for cash is called cash sales.

For example: Aslam sold computers to Amir for cash Rs. 50,000.

Sale / Turnover

Selling of goods/Merchandise to customer on cash / credit is called sale / turnover.

Cash Sale


Credit Sale


Sale Return / Return Inward / Return to Seller

Purchase Return / Return Outward / Return to Supplier

Goods return to the supplier is called purchase return/ return outward/ return to supplier. Return of goods

may be due to defective or over purchased or any other reason.

For example: Ahmed return goods (Computers) to supplier.