Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

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Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as sales discounts. This is because the seller is reducing the amount of revenue they are recording due to the discount given to the buyer. A trade discount is a discount given to a wholesale customer and is not recorded as a separate transaction. A purchase discount is a discount taken by the buyer and is not recorded on the seller's accounting records. Early payment discount is not a commonly used term in accounting.

Discounts Taken by a Buyer Because of Early Payment Are