To determine the difference between the selling price it is important to distinguish whether it is the price charged for the item or whether it is the discounted price the item is sold for. The two “selling prices” could differ because there is discount involved.
The discount granted on the selling price of an item is known as discount allowed. This discount is given at the time when the sales transaction takes place.
There are different types of discount, which may be granted in practice.
1.1 Cash discount
This is given on cash sales, takes place at the time of the sales transaction and is determined by the price policy of the enterprise.
1.2 Trade discount
This is given on sales in the trade, takes place at the time of the sales transaction and is determined by the price policy. It could also differ according to the quantities which are purchased.