Payment terms

Discounts and allowances are reductions to a basic price of goods or services.

They can occur anywhere in the distribution channel, modifying either the manufacturer's list price (determined by the manufacturer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or the list price (which is quoted to a potential buyer, usually in written form).

There are many purposes for discounting, including to increase short-term sales, to move out-of-date stock, to reward valuable customers, to encourage distribution channel members to perform a function, or to otherwise reward behaviors that benefit the discount issuer. Some discounts and allowances are forms of sales promotion.

The most common types of discounts and allowances are listed below.

Trade Discounts are deductions in price given by the wholesaler or manufacturer to the retailer at the list price or catalogue price. Cash Discounts are reductions in price given by the creditor to the debitor to motivate the debitor to make payment with in specified time . These discounts are intended to speed payment and thereby provide liquidity to the firm. They are sometimes used as a promotional device. we also explain that discount is relaxation in price.

Some retailers (particularly small retailers with low margins) offer discounts to customers paying with cash, to avoid paying fees on credit card transactions.

Similar to the Trade discount, this is used when the seller wishes to improve cash flow or liquidity, but finds that the buyer typically is unable to meet the desired discount deadline. A partial discount for whatever payment the buyer makes helps the seller's cash flow partially.

A discount offered based on one's ability to pay. More common with non-profit organizations than with for-profit retail.

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Wikipedia