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JAMB Commerce 1997 Question 26

Question 26

Purchase and Sale of Goods

The basic distinction between cash discount and trade discount is that while trade discount is

  1. A.for a period of 30 days, cash discount is for a period of 3 months
  2. B.given by a wholesaler, cash discount is given by a bank
  3. C.a reduction in the catalogue price of an article, cash discount is a reduction in the invoice value
  4. D.a reduction in value of sales, cash discount is a reduction in price of goods.
Show the answer and explanation

Answer: C (a reduction in the catalogue price of an article, cash discount is a reduction in the invoice value)

Explanation

Trade discount is taken off the list (catalogue) price to traders; cash discount is taken off the invoice amount for prompt payment.