You have seen small and medium merchants give normally goods on credit. Customers buy their home food and other necessary products and pays at the end of month. So, this is the type of trade credit.
Trade credit is the short term loan which is given by trader to other trader or customer in the form of goods. There is no interest on such loan but profit in the cost price is just like the interest.
In Financial accounting, trade credit will create the relationship between trader and customer as creditor and debtor. Both parties records all the transactions which are related to trade credit. One Trader shows other party as debtor and it will become its short term asset. Other customer will show trader as his creditor and it will become its short term liability.
In trade credit, Net 60, Net 30 and Net 10 are so popular. Net 60 means, customer has to pay the amount of his bought goods within 60 days. Net 30 means customer has to to pay the amount of his goods on credit within 30 days. Net 10 means, customer has to pay the amount of his bought goods within 10 days. It is better than taking bank loan because, you need not pay the interest on loan but in bank loan, your payable interest will start from first day of taking loan. Except this, if you will pay Net 60 within Net 10, you may receive cash discount.
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Source : Accounting Dictionary
Trade credit is the short term loan which is given by trader to other trader or customer in the form of goods. There is no interest on such loan but profit in the cost price is just like the interest.
In Financial accounting, trade credit will create the relationship between trader and customer as creditor and debtor. Both parties records all the transactions which are related to trade credit. One Trader shows other party as debtor and it will become its short term asset. Other customer will show trader as his creditor and it will become its short term liability.
In trade credit, Net 60, Net 30 and Net 10 are so popular. Net 60 means, customer has to pay the amount of his bought goods within 60 days. Net 30 means customer has to to pay the amount of his goods on credit within 30 days. Net 10 means, customer has to pay the amount of his bought goods within 10 days. It is better than taking bank loan because, you need not pay the interest on loan but in bank loan, your payable interest will start from first day of taking loan. Except this, if you will pay Net 60 within Net 10, you may receive cash discount.
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Source : Accounting Dictionary
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