MANAGEMENT

Detailed explanation-1: -Cash discounts refer to an incentive that a seller offers to a buyer in return for paying a bill before the scheduled due date. In a cash discount, the seller will usually reduce the amount that the buyer owes by either a small percentage or a set dollar amount.

Detailed explanation-2: -Cash discounts in accounting are usually expressed in the format 2/10, n/30. This shows the discount amount and the time period within which it is available in shorthand form. 2/10, n/30 indicates a 2% discount if the buyer pays the invoice within ten days, otherwise the net payment is fully due within 30 days.

Detailed explanation-3: -: a discount granted in consideration of immediate payment or payment within a prescribed time.

Detailed explanation-4: -In accounting, there are two different ways that cash discounts can be recorded in the books: the net method and the gross method. The net method treats sales revenue as the net amount after the given discount, and any discounts that the buyer doesn’t take are recorded as interest revenue.

Detailed explanation-5: -To calculate the cash discount, the formula uses the price and the rate. The formula reads: Cash Discount = Purchase Price x Discount Rate. For example, if the price of the product is $200 and the discount rate is 10%, then the cash discount would equal $20, which means the consumer saves $20.