What is a mark-down?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A mark-down is a reduction in the selling price of a product for a sale or promotion, often used to move surplus, slow-selling or discontinued lines. It works the opposite way to a mark-up: a mark-up is added to cost to set the price, while a mark-down takes an amount off that price, and off the profit.
A marked-down sale uses the agreed reduced selling price, whether the customer pays immediately or buys on credit. If the stock's carrying cost is unchanged, the reduction in price reduces the gross profit on that sale by the same amount. If stock has also lost value, ask your accountant whether a separate adjustment to its recorded value is needed.
Because the sales figures only show the lower price, a separate note of mark-downs helps, such as a promotion code or a sales report that shows both the full price and the price charged. That shows how much gross profit each promotion used up, and which products only sold once they were marked down.
In Australia
business.gov.au's glossary treats a mark-down as a type of discount, used while a product is on sale or promotion and often to clear lines that are surplus or no longer made. Its entry for discount refers readers to mark-down.
Its guide to improving cash flow lists offering markdowns on full-price goods or services among ways to increase sales, and separately suggests clearing out stock that is not selling, is out of date or is no longer useful.
Its inventory guidance suggests comparing stocktake results with sales records to find items that have not sold, and gives running a sale on slow-moving items as one way to act on what that comparison shows.
Worked example
| Item | At full price (AUD) | After the mark-down (AUD) |
|---|---|---|
| Selling price | 80.00 | 60.00 |
| Cost of the product | 48.00 | 48.00 |
| Gross profit on the sale | 32.00 | 12.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Keeping no record of which sales were marked down, so a fall in gross profit cannot be traced back to the promotion that caused it.
- Leaving the reduced price in place after the sale ends, so later sales go through at the marked-down price.
- Waiting until stock is out of date before marking it down, when comparing stocktake counts with sales could have shown much earlier that it was not selling.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Improve your cash flow
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Manage your inventory
business.gov.au, Australian Government. Current at 16 October 2026, released 19 November 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.