What term describes the early payment discount offered in terms like 3/15?

• A. Credit discount
• B. Cash discount
• C. Trade discount
• D. Quantity discount

Answer: (B)

Prompt payment discounts are cash discounts offered to encourage paying invoices early. In a term like 3/15, you may deduct 3% from the amount due if payment is made within 15 days; otherwise you owe the full amount. This is specifically a cash discount because it rewards early settlement with cash. It isn't a trade discount, which reduces the price from the list price regardless of when you pay, nor a quantity discount, which depends on how much is purchased. A “credit discount” isn’t a standard term used in this context.