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1%/10 Net 30

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1%/10 net 30 represent payment terms for a commercial transaction. The 1% in 1%/10 net 30 is the discount percentage; the 10 in 1%/10 net 30 is the days allowed to get the discount; and the 30 in 1%/10 net 30 is the days in which the bill must be paid. Thus 1%/10 net 30 means "the buyer gets a 1% discount if he pays within 10 days; otherwise, the full amount is due in 30 days." By offering the 1% discount in terms of 1%/10 net 30, creditors induce customers to pay their bills quickly. Creditors may offer larger discounts: instead of 1%/10 net 30, terms of 2%/10 net 30 give customers a 2% discount for paying bills in 10 days. Depending on accounting treatment, for the seller, terms of 1%/10 net 30 may require a contra account for sales discounts that decreases sales. Conversely, for the buyer, terms of 1%/10 net 30 may require a contra account for purchase discounts that, ultimately, reduces cost of goods sold. For publicly traded companies, however, the sales and purchases discounts implied by terms of 1%/10 net 30 are usually aggregated with other accounts and not listed separately on financial statements.



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