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An invoice carries the terms "2/10, net 30". What do these terms mean?
AA 10% discount is available if paid within 2 days, otherwise the full amount is due in 30 days
BA 2% discount is available if paid within 10 days, otherwise the full amount is due in 30 days
CInterest of 2% is charged after 10 days and the balance is due in 30 days
D2% of the invoice is due now and the remaining balance is due in 30 days
Answer & Solution
Correct answer: B. A 2% discount is available if paid within 10 days, otherwise the full amount is due in 30 days
1. In "a/b, net c", the first number is the discount percentage and the second is the days within which to pay to earn it.
2. So "2/10" means a 2% discount if paid within 10 days.
3. "net 30" means the full invoice is otherwise due within 30 days.
4. The numbers are not reversed (option B), and the terms describe a discount, not interest or a part-payment.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.3.1 "Discounts - The Buyer", p.97_
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