What is the difference between a trade discount and a cash discount in journal entries?

A trade discount is a reduction on the list price given for buying in bulk, and it is never recorded in the books. You simply subtract it first and journalise the net amount. For example, goods listed at 10,000 with 10 percent trade discount are recorded as a sale of 9,000. A cash discount is an allowance for paying promptly, and it is always recorded as a separate account. The seller treats cash discount allowed as an expense (Discount Allowed A/c Dr), and the buyer treats discount received as an income (Discount Received A/c credited). So if the buyer pays the 9,000 early and gets a 2 percent cash discount of 180, the entry is: Cash A/c Dr 8,820, Discount Allowed A/c Dr 180, to Debtor 9,000. Remember: trade discount adjusts the invoice; cash discount appears in the books.