Question

Discount allowed for prompt payment is called a ______.
1. Rebate discount
2. Trade discount
3. Quality discount
4. Cash discount

Answer 1

Correct Answer - Option 4 : Cash discount

The correct answer is Cash Discount

• Cash Discount- This discount is provided by a seller when a buyer makes prompt payment in cash or equivalent.
• This discount is provided if the buyer makes the payment within a specified period of time.
• Due to this reason, this is also called prompt payment discount. These discounts are shown in the books of accounts.

• Rebate discount- This is a type of discount that is provided under special conditions to buyers. For example- rebate to army persons in a restaurant. 
• Trade discount- The amount of discount in the list/dealer price of products offered by the seller to the buyer at the time of the transaction is referred to as a trade discount. This isn't reflected in the account because it's delivered before the transaction begins.