Trade

discounts
By :
RIZA V. MACAGALING
 TRADE
DISCOUNT

➢A trade discount is the reduction in

price a manufacturer or wholesaler
gives a wholesale or retail when they
buy a product or group of products.

➢In other words, a trade discount is a

certain percentage a manufacturer is
willing to reduce its list price for
wholesalers or retailers.
 SINGLE
DISCOUNT

➢ a discount that is given to a customer

(usually a wholesaler) when the
customer buys a product.
The discount is expressed simply as
a single discount of a given percentage.
For example, a 25% discount on the
purchase.
❑ Computing for discounts makes use of our basic percentage formula

P = BR
❑ Where the BASE is the List Price, the RATE is the Discount Rate, and
the PERCENTAGE is the Discount.

Discount = List Price x Discount Rate

List Price – original selling price of a product.
Discount Rate – the percent rate discount given to
the customer (with % symbol).
Discount – is the amount to be deducted from the list
price.
Net Invoice Price – the total amount that the
customer will pay after the discount was deducted
from the list price
Net Invoice Price Rate – it is the rate from 100%
minus the given discount rate.
Let's have some examples:
A refrigerator was marked to sell at Php 6, 750.00 less 5%. Find:

a. discount

b. net invoice price

c. net invoice price using the NIP rate

Solutions:

a. Discount = List Price x Discount Rate

= Php 6,750 x 5%
= Php 337.50

b. Net Invoice Price = List Price – Discount

= Php 6,750 – Php 337.50
= Php 6,412.50
Solutions:

c. Net Invoice Price Rate = 100% - 5%

= 95%

Net invoice Price = List Price x NIP rate

= Php 6,750 x 95%
= Php 6,412.50

To get the discount, we deduct the net invoice price from the list price

Discount = List Price – NIP

= Php 6,750 – Php 6,412.50
= Php 337.50
Let's have some examples:
A living room set worth Php 5,300 less 10%. Find:

a. discount

b. net invoice price

c. net invoice price using the NIP rate

This Photo by Unknown author is licensed under CC BY-NC.
Solutions:

a. Discount = List Price x Discount Rate

= Php 5,300 x 10%
= Php 530.00

b. Net Invoice Price = List Price – Discount

= Php 5,300 – Php 530
= Php 4770.00
Solutions:

c. Net Invoice Price Rate = 100% - 10%

= 90%

Net invoice Price = List Price x NIP rate

= Php 5,300 x 90%
= Php 4770.00

To get the discount, we deduct the net invoice price from the list price

Discount = List Price – NIP

= Php 5300 – Php 4770.00
= Php 530.00
 SERIES OF
DISCOUNT

➢ is when a seller offers more than

one discount on a product.

➢ For example, a seller could offer

three discounts on the item -- 25%,
15%, and 5%. These are computed
by taking each discount as a percent
of the price AFTER the
previous discount.
Let's have some examples:
A camera is listed at Php 1,315.00 less 15% and 3%. Find:

a. net invoice price

b. discount
Solutions:

Method 1:

List Price Php 1,315.00

Less 15% (Php 1,315 x 15%) 197.25
Difference Php 1,117.75
Less 3% (Php 1,117.75 x 3%) 33.53
Net Invoice Price Php 1,084.22

Total Discount = Php 197.25 + 33.53 = Php 230.78

Solutions:
Method 2:
100% - 15% = 85%
List Price Php 1,315.00
x 85%
1st Balance Php 1,117.75

100 – 3% = 97%
1st Balance Php 1,117.75
2nd Balance Rate x 97%
Net Invoice Price Php 1,084.22

Discount = Php 1,315 – Php 1,084.22 = Php 230.78

Solutions:
Method 3:
100% - 15% = 85%
100 – 3% = 97%
85% x 97% = 82.45 (NIP Rate)

100% - 82.45 = 17.55% (Single Equivalent Discount Rate)

Discount = List Price x Single Equivalent Discount Rate

= Php 1,315 x 17.55%
= Php 230.78

Net invoice Price = List Price – Discount

= Php 1,315 – Php 230.78
= Php 1,084.22
Let's have some examples:
Avesco Marketing sells a lighting fixture for Php 8,185.00 less 15% and
5%. Find:

a. net invoice price

b. discount
This Photo by Unknown author is licensed under CC BY-NC.
Solutions:

Method 1:

List Price Php 8,185.00

Less 15% (Php 8,185 x 15%) 1,227.75
Difference Php 6,957.25
Less 5% (Php 6,957.25 x 5%) 347.86
Net Invoice Price Php 6,609.39

Total Discount = Php 1227.75 + 347.86 = Php 1575.61

Solutions:
Method 2:
100% - 15% = 85%
List Price Php 8,185.00
x 85%
1st Balance Php 6,957.25

100 – 5% = 95%
1st Balance Php 6,957.25
2nd Balance Rate x 95%
Net Invoice Price Php 6,609.39

Discount = Php 8,185.00 – Php 6,609.39 = Php 1,575.61

Solutions:
Method 3:
100% - 15% = 85%
100 – 5% = 95%
85% x 95% = 80.75 (NIP Rate)

100% - 80.75 = 19.25% (Single Equivalent Discount Rate)

Discount = List Price x Single Equivalent Discount Rate

= Php 8,185 x 19.25%
= Php 1,575.61

Net invoice Price = List Price – Discount

= Php 8,185 – Php 1,575.61
= Php 6,609.39
❑ In Accounting, trade
discounts are not
recorded because
accounting records
reflect only the net
invoice prices, that is,
sales and / or
purchases are the
recorded net of trade
discounts.