Cash Discount
Definition
A reduction offered to a customer for paying within a set time. Unlike a trade discount, it is recorded in the books because it affects the amount actually received against the invoiced total.
Related Terms in Core Accounting
Outstanding Expenses
Expenses that relate to the current period but remain unpaid at its end, recorded as a liability so the cost is matched to the right period. They are a form of accrued expense.
Contingent Liability
A possible obligation that depends on an uncertain future event, such as a pending lawsuit or guarantee. It is disclosed in the notes rather than recorded, unless payment becomes probable and measurable.
Provision for Doubtful Debts
An estimate of receivables unlikely to be collected, charged as an expense and set against the receivables balance. It applies the prudence principle so assets and profit are not overstated.
Capital Reserve
A reserve created from capital profits — such as gains on sale of fixed assets or premium on shares — rather than from trading profit. It is generally not available for distribution as dividends.
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