Final answer:
Sales Discounts is a contra-revenue account that typically has a credit balance before closing entries at the end of an accounting period.
Step-by-step explanation:
The statement is true. Sales Discounts is a contra-revenue account that is used to record the reduction in revenue that occurs when sales are made at a discount. It typically has a credit balance because it is subtracted from the revenue account, resulting in a lower net sales amount. Contra-revenue accounts are necessary to accurately report the net sales and gross profit of a business. At the end of an accounting period, closing entries are made to transfer the balance of Sales Discounts to the Income Summary account, which is then closed to Retained Earnings.