Definition Definition

Sales discount

A sales discount is a reduction or cash discount that is given by a seller to the customer for prompt payment of the balance due. It is based on the invoice price less returns and allowances, if any. The seller increases (debits) the Sales Discounts account for discounts that are taken. For example, PW Audio Supply makes the following entry to record the cash receipt on May 14 from Sauk Stereo within the discount period.

Sales discount is a contra-revenue account to sales. Its normal balance is a debit.

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