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Discounts: Prepared By: Rotap, Chrizell Celis, Glenda

This document discusses discounts, including trade discounts and cash discounts. Trade discounts are reductions given by wholesalers or retailers off the list price of an item. Cash discounts are incentives offered to buyers for early payment. The document provides examples of calculating discounts using common terms like list price, net price, discount rate and formulas. Exercises at the end provide practice calculating discounts in different scenarios.

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Chrizell Rotap
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59 views15 pages

Discounts: Prepared By: Rotap, Chrizell Celis, Glenda

This document discusses discounts, including trade discounts and cash discounts. Trade discounts are reductions given by wholesalers or retailers off the list price of an item. Cash discounts are incentives offered to buyers for early payment. The document provides examples of calculating discounts using common terms like list price, net price, discount rate and formulas. Exercises at the end provide practice calculating discounts in different scenarios.

Uploaded by

Chrizell Rotap
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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DISCOUNTS

P R E PA R E D B Y:
R O TA P, C H R I Z E L L
CELIS,GLENDA
WHAT IS DISCOUNT?
A DEDUCTION FROM THE USUAL COST OF SOMETHING,TYPICALLY
GIVEN FOR PROMPT OR ADVANCE PAYMENT OR TO A SPECIAL
CATEGORY OF BUYERS.

TYPES OF DISCOUNT
•Trade Discount
•Cash Discount
TRADE DISCOUNT
THE AMOUNT OF DISCOUNT THAT THE
WHOLESALER OR RETAILER RECEIVES
OFF THE LIST PRICE OR THE
DIFFERENCE BETWEEN THE LIST PRICE
AND THE NET PRICE.
KEY TERMS IN TRADE DISCOUNT

• LIST PRICE- the price which the manufacturer


suggest an item be sold to the consumer
• NET PRICE- is the value at which a product or service
is sold after all taxes and other costs are added and
all discounts subtracted
• DISCOUNT PRICE- a percent of the list price
Formulas: (TD=LPxR) (NP=LP-TD)
EXAMPLES OF TRADE DISCOUNT

• Dominador will buy a box of canned tuna that list for P680 and has a
trade discount of 25%. How much is the Net Price?
Solution: Trade discount= List Price ×Rate
Trade Discount= P680 × .25
=P170
NP=LP-TD
NP= P680-P170
=P510
Clementina will buy a coffee maker for P1,500 and
has a trade discount of 50%. How much will
Clementina pay?
Solution:
Trade Discount= P1,500 x .50
= P750
Net Price= P1,500-P750
= P750
CASH DISCOUNT
AN INCENTIVE THAT A SELLER
OFFERS TO A BUYER IN RETURN
FOR PAYING A BILL OWNED
BEFORE THE SCHEDULED DUE
DATE
WAYS TO CALCULATE CASH DISCOUNTS
2/10” REFERS TO THE CASH DISCOUNT
N/30” REFERS TO THE NET AMOUNT DUE

1.Ordinary Dating Method- credit terms 2/10 ,n/30. This means you will get a 2%
discount if you pay within 10 days of receiving the invoice. You must pay the bill within 30 days
or you start to incur interest charges.
EX.
2. End of the Month Method (E.O.M)-credit term is 2/10 , n/30. This means
you get a 2% discount if you pay within the first 10 days of the next
month. You must pay the bill within the first 30 days of the next month
or you start to incur interest charges.
Example:
VanCreme Incorporation received an invoice for P50,000 dated June 5,2019, terms
2/10 EOM. The invoice is paid on July 10,2019. How much is the amount paid?
Date of Invoice: June 5,2019
Day 1 of the discount period: July 1,2019
Last day of the discount period: July 10,2019
Date of Payment: July 10,2019 (VanCreme Inc. got a discount)
SOLUTION:
Cash Discount= Price x Discount Rate
= P50,000 x.02
=P1,000
Net Amount= Price- Cash Discount
= P50,000-P1,000
= P49,000

3.RECEIPT OF GOODS DATING METHOD


Credit terms is 2/10 ROG. This means you get a 2% discount
if you pay within the first 10 days after the goods are
received
Example: DMG, Inc. received an invoice of $4750 dated January 10, terms 2/10 n/30 R.O.G., for
a shipment that arrived on February 05. What is the last day for taking the cash discount?
Solution: Date of invoice January 10
Day 1 of the discount period February 06
Last day of the discount period February 15
Cash discount=Price x Discount Rate
=$4750 x.02
=$95
Net amount= Price-Cash discount
=$4750-$95
=$4655
EXERCISES
1.10 VEHICLES WERE PURCHASED BY UNREAL PVT
LTD WITH A 5% TRADE DISCOUNT ON THE LIST
PRICE OF 1,000,000 EACH.

2. LET’S ASSUME THAT 100 KEYBOARDS ARE SOLD


FOR THE LIST PRICE OF 300 EACH WITH A TRADE
DISCOUNT OF 10%. 

3. LET’S ASSUME THAT 10 TABLES ARE PURCHASED


FROM UNREAL PVT LTD. AT THE LIST PRICE OF 3000
PER ITEM AND 25% DISCOUNT (TRADE) IS
ALLOWED.
1.AN INVOICE DATED 2 JANUARY 2015 WITH AN
AMOUNT OF P4010 WAS OFFERED CASH DISCOUNT
TERMS OF 2/10, N/30. IF THE INVOICE WAS PAID
ON 11 JANUARY 2015, WHAT WAS THE NET
PAYMENT?

2. A RETAILER RECEIVED AN INVOICE OF P2,300


DATED 10 APRIL 2019. HE WAS WAS OFFERED CASH
DISCOUNT TERMS OF 2/10, N/30. HOW MUCH HE
NEEDS TO PAY IF HE PAID THE INVOICE ON 28 APRIL
2019?
ANSWERS

1. 100,000,000 x 0.5 4. Date of Invoice: January 2,2015


= 50,000,000 Day 1 of discount: January 3,2015
Last day of discount: January 12,2015
NP= 100,000,000-50,000,000 Payment: January 11,2015
= 50,000,000 CD=4,010 x0.20= 802
2. TD=30,000 x 0.10 NP= 4,010-802=3,028
=3,000 5. Date of invoice: April 10,2019
NP= 30,000-3,000 Day 1 of discount:April 11,2019
= 27,000 Last day of discount: April 20,2019
3. TD= 30,000 x 0.25 Payment: April 28,2019
= 7,500 Bill: P2,300
NP= 30,000 -7,500

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