Question

Explain the following term/concept.

Trade credit

Answer 1

(a) Trade Credit refers to the facilities or credit extended by the manufacturer, wholesalers, and suppliers of goods to the purchaser but receives payment after the credit period from the date of purchase. Manufacturers, wholesalers, and suppliers of goods or materials are called Trade Creditors'.

(b) This practice is done by a business concern with an intention to increase its sales or turnover, generate additional business and maintain good relations with the purchasers.