How to Define a Purchase Discount

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A purchase discount is an inducement for early payment provided by vendors to people or customers who pay bills ahead of time. Get a percentage off of a purchase pay back by paying in a timely fashion with advice from a certified public accountant in this free video on accounting terms.

Part of the Video Series: Business & Accounting Terms
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Video Transcript

How do we define a purchase discount? In everyday course of business we make purchases of goods, products, services for use in our business or for resale. As an inducement for early payment, vendors will give us a discount for paying our bills timely or ahead of timeliness. As an example, if normally we would pay our bills in 30 days and pay them in full, the vendor may give us a discount of 1% or 2% off the purchase price for paying 10 days after we receive the goods. That's it.


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