Accounting Payment Terms

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Invoices use specific accounting terms for payments.
Invoices use specific accounting terms for payments. (Image: Blue pen in front of invoice image by millann from <a href='http://www.fotolia.com'>Fotolia.com</a>)

In accounting, invoices are used to document the sale of a product or service. The invoice uses specific payment terms. Accountants need to be well-versed in these terms in order to understand how to properly account for the sale. Normally, terms have two parts: a discount part and a net part.

Discount Term

A term could look like 2/10, n/30. The first set of numbers, 2/10, is the discount term. The first number is a percentage, in this case 2 percent. The second number is a date, in this case 10 days. If the buyer pays the invoice in 10 days, he will receive a 2 percent discount.

Net Terms

A term could look like 2/10, n/30. The second set of letters and numbers, n/30, is the net terms. The letter "n" stands for net. This means the full amount is due. The second number is a day, in this case 30 days. In this example, the buyer owes the full amount in 30 days.

EOM

Often a buyer may see a term that states net 10 EOM. (EOM stands for end of month.) This means the buyer must pay the full amount of the invoice within 10 days of the end of the month.

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