Goods purchase/sale: Discounts and cash discounts

In the context of purchasing/selling goods, discounts and rebates are often granted by the parties involved in trade. This article will explain these two terms.

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

• Volume discount for large orders
• Defect discount for poor quality delivery
• Reseller discount for deliveries to intermediaries
• Special discount due to a special occasion (company anniversary, business opening, etc.)

Discounts are indicated on invoices, where the net amount after deduction of the discount is always recorded in the purchase and sale of goods.

The cash discount is a kind of "reward" for early payment. It is listed as a payment condition on the invoice but is not yet deducted because the debtor has a choice. Either he pays the invoice within the deadline and benefits from the cash discount deduction or he pays it later at the normal price.

Example: 1000 A4 black folders

Gross price: CHF 3/piece = 3000.–.

20% volume discount = 600.

Net price = 2400.

Payment terms:

• 10 days 2% cash discount
• 30 days net