What term describes a reduction of the price given for payment of an account within the time limits established by the sales contract?

• A. Cap
• B. Casket
• C. Cash Advances
• D. Cash Discount

Answer: (D)

A cash discount is a reduction offered on the purchase price when payment is made within the contract’s specified time frame. This incentive encourages paying promptly, improving the seller’s cash flow and reducing credit risk. For example, a terms might allow a discount if paid within 10 days; otherwise the full amount is due later. The other terms don’t describe this idea—one is unrelated to discounts, one is a product, and the other refers to upfront funds rather than a price reduction for timely payment.