The main difference between a trade discount and a cash discount is that a separate ledger account for discounts allowed is opened in the books of the seller and discount received in the books of the buyer for a cash discount, but no such account is created in case of a trade discount.
Trade discount refers to the deduction given by the supplier to the customer in the catalog price of the goods. Cash discount implies the allowance granted to the customers by the supplier on the invoice price, for immediate payment.
Trade discounts have a fixed percentage whereas cash discounts may or may not have a fixed percentage. Trade discounts are deducted from the invoice value or catalog price of the goods. Cash discounts are deducted from the invoice value of goods. Trade discounts are not entered in the books of accounts. Cash discounts appear as an expense in Income Statement.
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