Discount allowed
In one sentenceA discount the business gives its customer for paying before the agreed date, so it collects less than the invoice value in exchange for faster collection.
Simply put
It is the other side of the discount received: here you are the seller, and you accept a lower amount to get the cash early and reduce the risk of late payment.
Under international standards (IFRS 15) this discount is usually treated as a reduction of revenue, not a separate expense, because it is part of the actual selling price.
Worked example
A food factory is owed 50,000 SAR by a distributor and offered him a 1% discount if he paid within a week, which he did (amounts before VAT for simplicity).
Discount: 50,000 × 1%500 SAR
Collected: 50,000 − 50049,500 SAR
What the factory gave up in exchange for early collection500 SAR
Don't confuse it with
Discount receivedA discount received is one you get from the supplier, while a discount allowed is one you give the customer.