In the context of net sales, what does the sales discount term '2/10, n/30' mean?

• A. A 2% discount is offered if payment is made within 10 days; otherwise, the net amount is due in 30 days.
• B. A 10% discount is offered if payment is made within 2 days; otherwise, the net amount is due in 30 days.
• C. A 2% discount is offered if payment is made within 30 days; otherwise, the net amount is due in 10 days.
• D. A 10% discount is offered if payment is made within 2 days; otherwise, the net amount is due in 10 days.

Answer: (A)

Verified step by step guidance

1. Understand the term '2/10, n/30': This is a common sales discount notation used in financial accounting. It specifies the conditions under which a discount is offered for early payment.
2. Break down '2/10': The '2' represents the percentage discount offered (2%), and the '10' indicates the number of days within which the payment must be made to qualify for the discount.
3. Interpret 'n/30': The 'n' stands for the net amount (the full invoice amount without any discount), and '30' indicates the total credit period allowed for payment. If the payment is not made within the discount period (10 days), the full amount is due within 30 days.
4. Compare the options provided: Evaluate each option against the meaning of '2/10, n/30' to identify the correct interpretation. For example, the first option correctly states that a 2% discount is offered if payment is made within 10 days, and the net amount is due in 30 days otherwise.
5. Conclude the correct interpretation: Based on the breakdown and comparison, the correct answer aligns with the first option, which accurately describes the sales discount term '2/10, n/30'.