Often customers ask for term discounts such as 2% Net 10, meaning a 2% discount will be given provided the customer pays within 10 days. A trade discount is a discount given to a customer regardless of the payment terms. The terms discount information is stored in the invoice's terms field and the trade discount information is stored in the invoice's discount field.
Since one is never sure if a customer is going to take advantage of the payment terms offered it requires some special handling as shown in the example below:
Assume a customer is invoiced and is given a 20% trade discount, and a 2% Net 10 terms discount on the invoice.
After the customer is invoiced, enter a general ledger transaction to "Register the accounts receivable invoice (O)". The discount field in the invoice would be 20% and the terms field would read 2% Net 10. pc/MRP will include the trade discount but not the terms discount as it has no idea if the customer will pay in time.
If the customer pays, but not within 10 days, enter a general ledger transaction to register the "Accounts Receivable Payment (R). pc/MRP will include the trade discount but not the terms discount.
If the customer pays within 10 days and takes advantage of the terms discount, edit the first line item on the invoice, add the terms discount to the trade discount (20% would be changed to 22%), save the line item and answer yes to update the header on all line items and then enter a general ledger transaction (accounts receivable payment). Enter the amount received as the amount received, Debit checking for the amount of the check, debit cash discount for the 2% difference, and credit accounts receivable for the full amount originally due.