CBSE Class 11-commerce Answered

Trade credit is the type of business finance which convert value of purcases into trade payable.

Trade credeit refers to the credit granted to manufacturers and traders of goods and services by suppliers. No immediate cash payments are made by the purchaser if trade credit is extended. It is granted only to customers or traders who are considered creditworthy by the supplier and have a good financial standing. The credit term varies from one industry to another and from person to person.