If the number of discounts taken by customers are few and the impact of these discounts on reported sales results are minimal, then the accounting treatment just noted is acceptable.
If a customer takes advantage of these terms and pays less than the full amount of an invoice, the seller records the discount as a debit to the sales discounts account and a credit to the accounts receivable account. Another common sales discount is '2% 10/Net 30' terms, which allows a 2% discount for paying within 10 days of the invoice date, or paying in 30 days. How to Account for Sales DiscountsĪn example of a sales discount is for the buyer to take a 1% discount in exchange for paying within 10 days of the invoice date, rather than the normal 30 days (also noted on an invoice as '1% 10/ Net 30' terms).
A sales discount may be offered when the seller is short of cash, or if it wants to reduce the recorded amount of its receivables outstanding for other reasons. A sales discount is a reduction in the price of a product or service that is offered by the seller, in exchange for early payment by the buyer.