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What are credit terms?

Author:
Harold Averkamp, CPA, MBA

Definition of Credit Terms

Credit terms indicate when payment is due for a company’s sales invoice (which the customer will refer to as a purchase invoice).

The credit terms also indicate whether a discount can be taken if the invoice is paid in a shorter period of time (the discount period). This discount is also referred to as:

Examples of Credit Terms

Some examples of credit terms include:

  • Net due upon receipt
  • Net 30 days (which means the amount owed is due in 30 days)
  • 1/10, n/30 (which means 1% can be deducted from the amount owed if paid within 10 days instead of the required 30 days)
  • 2/10, n/30 (which means 2% can be deducted from the amount owed if paid within 10 days instead of the required 30 days)
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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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