Discounts

Question 1

What are the three types of discount ?

Answer 1

1. Trade discount
2. Bulk discount
3. Prompt payment discount

Question 2

What is the definition of a trade discount ?

Answer 2

A trade discount is a definite amount that is deducted from the list price of the goods for the supplies to some customers, with the intention of encouraging and rewarding customer loyalty.

Question 3

What is the definition of a bulk discount ?

Answer 3

A bulk discount is similar to a trade discount in that it is deducted from the list price of the goods and disclosed on the invoice. However, a bulk discount is given by a supplier for sales orders above a certain quantity.

Question 4

What is the definition of a prompt payment discount ?

Answer 4

Prompt payment discounts (also known as settlement or cash discounts) are offered to customers in order to encourage early payment of invoices.