Coupon definition
/What is a Coupon?
A coupon is a voucher that entitles the holder to a discount on a particular purchase. The issuance of a coupon allows the seller to advertise the discounted price of a product or service, net of the coupon, while not necessarily paying the amount of the coupon; a buyer must take action to present the coupon in order to receive a discount. Only the more price-sensitive shoppers collect and present coupons; all other shoppers typically pay full price. Thus, the net result of a coupon issuance is a relatively small discount from gross sales for the seller.
Advantages of Coupons
Coupons are useful for clearing out excess inventory , as well as to introduce customers to new products. When presented as a general discount on all goods and services, they are more useful for introducing customers to a store.
Disadvantages of Coupons
Coupons are expensive to print and distribute. Also, if a customer uses a coupon, the issuer loses the margin represented by the amount of the coupon; this represents a clear loss to the seller if the buyer was going to make a purchase even if the coupon had not been offered.
Accounting for Coupons
There is no accounting for a coupon, since the discount stated on the coupon is deducted from the price of the related product or service at the point of sale. The result is a net sale, which is then recorded by the selling party.
Bond Coupon
A coupon is also the annual interest rate paid on a bond, stated as a percentage of the face value of the bond. It may also be referred to as the coupon rate.
