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.