Difference Between Trade Discount And Quantity Discount

Both Trade Discount and Quantity Discount are types / kinds of Discount, but these two have some main differences shown below.

Trade Discount is offered by sellers to buyers at the price list or catalog price because it is already deducted by sellers from listed price before the selling price / invoice price is set. It is not recorded in any of company ‘s financial statements.

Quantity Discount is an incentive given by sellers to buyers to buy more than the specific quantity of goods or services e.g., buy more than 2 products. It is given in an excess of trade discount. It reduces per unit cost of the products. It is included / added in the Cash Discount.

For example, if the selling company offered 10% trade discount of catalog price ($500) for furniture to its customers, then the selling price is $450 (500 - (500 X 10%). So $50 is trade discount which is deducted from catalog price. Now, if the seller offered quantity discount i.e., if buyers buy more than 2 chairs, then he will get at the unit cost of $30 instead of $40 for each chair purchased. So, if buy purchased 3 chairs, then quantity discount is shown below:

                        Quantity Discount = (3 X 40) - (3 X 30) = 120 - 90 = $30