Cash Discount

A cash discount is a discount for early payment, generally based on a percentage of the sales price. For example, a discount of 2/10, n/30 offers the purchaser a discount of 2 percent of the sales price if payment is made within 10 days. If the discount is not taken, the entire (gross) amount is due in 30 days. Sales may be recorded either on a gross basis or a net basis with respect to cash discounts. See also gross method (of recording sales) and net method (of recording sales) and trade discounts.