A reduction in the price (list price) of a product/ service that is offered by a seller, against prompt or early payment by customers in relation to their trade accounts (credit sales).  Business may offer sales discounts as a way to encourage customers to make payment, particularly when such businesses are in immediate need of money.

Sales discounts are recorded in a contra‐revenue account, so that the management can evaluate the effectiveness of its discount policy. Items sold on credit usually come with specific terms for early payment, such as a definition of sales discount if available. The sales discount is applied as a particular percentage of the sales price, either in the form of cash discount or trade discount.

For example, the credit terms on an invoice may define sales discounts  5/10, n/30, which reds “five‐fifteen, net thirty.”, meaning that the customer may receive a 5 percent discount on the outstanding balance (original invoice amount adjusted for any returns and allowances) if it is settled within fifteen days of the invoice date. Otherwise, the outstanding balance will fall due within thirty days.

Credit terms may indicate end of month (EOM) as the date after which the outstanding balance is due for payment. The terms n/10 EOM imply that the outstanding balance will fall due ten days after the end of the month marking the invoice date.