Goods purchase/sale: Discounts and cash discounts

In connection with the purchase/sale of goods, discounts and cash discounts are often granted by the parties in commercial transactions. This article explains the two terms.

Discounts are percentage reductions on the gross price and are usually granted as:

• Quantity discounts for large orders
• Discounts for poor quality deliveries
• Resale discounts for deliveries to intermediaries
• Special discounts for special occasions (company anniversaries, store openings, etc.)

Discounts are shown on invoices, whereby the net amount after deduction of the discount is always recorded for the purchase and sale of goods.

A cash discount is a kind of “reward” for early payment. It is listed on the invoice as a payment term, but is not yet deducted because the debtor has a choice. Either they pay the invoice within the deadline and benefit from the cash discount, or they pay it later at the normal price.

‍Example: 1000 black A4 file folders

Gross price: $3/each = $3000.

20% volume discount = $600.

Net price = $2400.

Payment terms:

• 10 days 2% cash discount
• 30 days net

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