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    Cash Discounts

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    Donquixote Mingo
    The document discusses cash discounts and terms of sale. It defines cash discounts as discounts given by companies to encourage prompt payment, usually denoted as a percentage off if paid within a specified number of days. It provides examples of common terms like 2/10 net 30, meaning 2% off if paid within 10 days, otherwise net amount due within 30 days. The document shows how to calculate discount periods, credit periods, cash discounts, and net amounts due on invoices paid within the discount period using various discount rates and terms.

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    Cash Discounts

    Uploaded by

    Donquixote Mingo
    105 views13 pages
    The document discusses cash discounts and terms of sale. It defines cash discounts as discounts given by companies to encourage prompt payment, usually denoted as a percentage off if paid within a specified number of days. It provides examples of common terms like 2/10 net 30, meaning 2% off if paid within 10 days, otherwise net amount due within 30 days. The document shows how to calculate discount periods, credit periods, cash discounts, and net amounts due on invoices paid within the discount period using various discount rates and terms.

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    Cash-Discounts

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    The document discusses cash discounts and terms of sale. It defines cash discounts as discounts given by companies to encourage prompt payment, usually denoted as a percentage off if paid within a specified number of days. It provides examples of common terms like 2/10 net 30, meaning 2% off if paid within 10 days, otherwise net amount due within 30 days. The document shows how to calculate discount periods, credit periods, cash discounts, and net amounts due on invoices paid within the discount period using various discount rates and terms.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    105 views13 pages

    Cash Discounts

    Uploaded by

    Donquixote Mingo
    The document discusses cash discounts and terms of sale. It defines cash discounts as discounts given by companies to encourage prompt payment, usually denoted as a percentage off if paid within a specified number of days. It provides examples of common terms like 2/10 net 30, meaning 2% off if paid within 10 days, otherwise net amount due within 30 days. The document shows how to calculate discount periods, credit periods, cash discounts, and net amounts due on invoices paid within the discount period using various discount rates and terms.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Cash

    Discounts
    BUSINESS MATHEMATICS
    ABM 11
    1
    Objectives
    1. Explain the meaning of different terms of sale;
    2. Compute the deadline for discount
    period;
    3. Compute the deadline for credit term;
    and
    4. Compute for cash discounts and net
    amount payable.
    Cash Discounts
    • Discounts given by the company to
    encourage prompt payment.
    • It is recorded separately in the book of
    accounts.
    • Designated by notation as "2/10" which
    means that the buyer may avail 2 percent
    (2%) discount if the invoice is paid within
    10 days.
    • Called purchase discounts from the buyer's
    view point and sales discount from the
    seller's view point. 2
    Term of Sale or Purchase
    The following terms of
    1.) 2 = n payment:
    10 30
    Read as "two ten, n thirty", which means the buyer gets 2%
    discount if he/she pays within 10 days from invoice date. If
    the 10-day period has elapsed, the buyer will be given 30 days
    from the date of the invoice within which to pay his or her
    account without additional charges.
    10-day period called discount period
    30-day period called credit period
    4
    Term of Sale or Purchase
    The following terms of
    1.) 3 = 2 = n payment:
    10 15 60

    Read as "three ten, two fifteen, n sixty.", that means that


    the buyer will be given 3% discount if he she pays within
    10 days from the date of invoice; or 2% discount if he/she
    pays within 15 days from the invoice date; or, if he/she
    failed to take advantage of the discounts being offered,
    he/she has to pay within 60 days from the date of invoice.

    5
    Computing for Discount Period
    and Credit Period
    To compute for the deadlines for the discount and the credit periods, let us
    study the following examples:

    Given: Date of invoice: March 2


    Term: 2/10, n/30
    a. To solve for the deadline for the discount period, we
    count 10 days from March 2; hence we get March 12:
    • Date of invoice : March 2
    • Discount Period : 10 days
    • Deadline for the discount period: March 12
    6
    b. To solve for the deadline for the credit period
    March has 31 days
    Less invoice days: 2
    No. of days in March: 29 days
    Credit Period: 30
    Deadline for the credit period: April
    1

    7
    Cash Discounts
    Ex. Invoice amount: P 5 000
    Invoice date: September 28
    Term: 3/15=n/60

    Find: a. Cash Discounts


    b. Net amount due

    8
    Solutions:
    a. Cash discount= Invoice x Cash discount rate
    = P 5 000 x 3%
    = P 150

    b. Net amount due= Invoice amount - Cash discount


    = P 5 000 - 150
    = P 4 850

    9
    Ex. On June 5, 2018, Sansan Company sold goods with
    an invoice price of P 25 000, terms 2/10, n/30. The
    invoice was paid on June 12, 2018. What is the net
    amount due?
    6, 7, 8, 9, 10, 11, 12 = 7 days

    Invoice Price = P 25 000


    Less: Cash Discount = 500
    (25 000 x 2%)
    _________________________________
    Net amount due = P 24 500 10
    Find the cash discount and net amount due if the following
    invoices are paid within the discount period.

    Net Invoice Price Terms of Payment Cash Discounts Net Amount Due
    a. P 3 265.00 3/10, n/30
    b. P 1 342.50 2/15, n/60
    c. P 985.00 3/5, n/15
    d. P 266.50 1/15, n/45
    e. P 839.75 3/30, n/90

    11
    JD Enterprises purchased veterinary supplies from RL Commercial. The total
    invoice price of the supplies both amounted to P 25 859. The term of payment
    written on the invoice is 3/10, 2/15, and n/60. The invoice date is March 15, 2011.

    a. Find the deadline for 3% discount


    b. Find the deadline for 2% discount
    c. Find the deadline for the credit period
    d. How much will JD Enterprises pay if it pays within the 3% discount
    period?
    e. How much will JD Enterprises pay if it pays within the
    2% period?

    12
    Thank You!
    Prepared By:
    Jasmine Erisha S. Balingbing
    Jamaica Bernal

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