Which expense is incurred when a company offers a reduction in prices for prompt payment?

The correct answer, which is discount allowed, refers to an expense that a company incurs when it provides a reduction in prices to encourage customers to pay their invoices quickly. This practice is common in managing cash flow, as it incentivizes prompt payment, allowing the company to maintain liquidity and reduce the risk of bad debts. The discount is essentially a cost to the business, reflecting the financial benefit provided to customers who pay their debts on time.

When customers take advantage of the discount allowed, the company records this as an expense in its financial statements, reducing its income for that period. This is important for accounting as it directly impacts the net profit reported by the company, and it is classified as a selling expense within the income statement.

The other options refer to different types of expenses that do not relate directly to the act of providing discounts for prompt payment. Accountant fees are costs incurred for services related to accounting and financial reporting, depreciation on a delivery van refers to the systematic reduction in value of a fixed asset over time, and doubtful debts rates pertain to the estimation of accounts receivable that may not be collected, which is a different context.