In accounting, a cash discount or sales discount is any discount you get from a supplier, typically for paying your bill promptly. A "2/10 net 30" discount, for instance, gives you 2 percent off if you pay in full within 10 days. Otherwise, you pay the normal price within 30 days. Even though the supplier hasn't paid you money, you can treat it like a cash payment by recording it on your income statement.

Income Statement

Suppose your company orders $10,000 worth of inventory under a 2/10 net 30 arrangement. You pay in nine days, which gets you a 10 percent discount and saves $200 off the full price. On your income statement, you report $200 in "miscellaneous income" or "other income." An alternative approach is to report the cost of goods sold as $9,800 rather than the full $10,000.