BUSINESSmathematics

CHAPTER 3: BUYING AND SELLING

Lesson 1: PRICING
COST refers to the purchase price of an article.
Initial Markup or Mark-on refers to the amount
added to cost to arrive at the original selling price. It
is sometimes, referred to as margin.
Cost ……………………………………………….………….. ₱ 100.00
Plus: Initial Markup or mark-on …..……….…….₱ 20.00
Original selling price ………………….………………. ₱ 120.00
Additional markup refers to the amounts added to
the original selling price to arrive at a new selling
price.
Original selling price ………………………….………. ₱ 120.00
Plus: Additional Markup.................……………. ₱ 30.00
New selling price …………………………………….….₱ 150.00
Markup cancellation refers to the decrease in the
new selling price that does not decrease it below the
original selling price.
New selling price ………………….…………………….₱ 120.00
Less: Markup cancellation …………………………. ₱ 10.00
Reduce selling price .…………………………………. ₱ 140.00
Less: Markup cancellation …………………………. ₱ 20.00
Original Selling price …………………………………..₱ 120.00
Mark down refers to reduction in the original selling
price.
Original Selling price …………………………………..₱ 120.00
Less: Mark down …………….…………………………. ₱ 5.00
New reduced selling price…….……………………. ₱ 115.00
Less: Mark down …………….…………………………. ₱ 5.00
New Reduce selling price .……………….………….₱ 110.00
Difference between Markup and Margin
Margin (also known as gross margin) is sales minus
the cost of goods sold.
Example: If a profit sells for ₱200.00 and costs
₱140.00 to manufacture, its gross margin is ₱60.00.
The margin stated as a percent is 30%. This is the
markup based on sales or selling price.
Difference between Markup and Margin
Markup is the amount by which the cost of a product
is increased in order to derive the selling price.
Example: A markup of ₱60.00 to the ₱140.00 cost
yields the ₱200.00 selling price. Stated as a percent,
the rate is 42.86%. This is the markup based on cost.
The margin is addressing the profit as it relates to
selling price; whereas, the markup addresses the profit
as it relates to cost price.
Margin Markup
(Based on Sales) (Based on Cost)
Cost ₱ 140.00 70% 100%
Markup ₱ 60.00 30% 42.86%
Selling Price ₱ 200.00 100% 142.86%
Markup Based on Cost
Sales selling price ….………………………….………. ₱ 450.00
Cost of goods sold (cost).................……………. ₱ 300.00
Gross profit (markup)…………………………….…. ₱ 150.00

Markup in terms of percent based on cost

Sales selling price ….………………………….………. 150%
Cost of goods sold (cost).................……………. (100%)
Gross profit (markup)…………………..………….…. 50%
Markup Based on Cost
𝑃
𝑅=
𝐵

𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑎𝑠 % 𝑜𝑓 𝑐𝑜𝑠𝑡 =
𝐶𝑜𝑠𝑡
₱450
=
₱300
= 1.5
= 150%
Markup Based on Cost
𝑃
𝑅=
𝐵

𝑀𝑎𝑟𝑘𝑢𝑝
𝑀𝑎𝑟𝑘𝑢𝑝 𝑎𝑠 % 𝑜𝑓 𝑐𝑜𝑠𝑡 =
𝐶𝑜𝑠𝑡
₱150
=
₱300
= 0.5
= 50%
Markup Based on Cost
Sales selling price ….………………………….. ₱ ? 130%
Cost of goods sold (cost).................…… (₱ 200.00) (100%)
Gross profit (markup)………………………… ? 30%

𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 = (₱200.00)(130%)

= (₱200.00)(1.3)
= ₱260.00
Sales selling price ….………………………….. ₱ 260.00 130%
Cost of goods sold (cost).................…… (₱ 200.00) (100%)
Gross profit (markup)………………………… ₱ 60.00 30%
 Markup Based on Cost
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 = 𝐶𝑜𝑠𝑡 + 𝑀𝑎𝑟𝑘𝑢𝑝
= 𝐶𝑜𝑠𝑡 + (𝐶𝑜𝑠𝑡 × 𝑀𝑎𝑟𝑘𝑢𝑝 𝑟𝑎𝑡𝑒 𝑏𝑎𝑠𝑒𝑑 𝑜𝑛 𝑐𝑜𝑠𝑡)
= ₱200.00 + (₱200 × 30%)
= ₱200.00 + ₱60.00
= ₱260.00

From the above, we see that our selling price is ₱260.00 and
our markup is ₱60.00, which prove our previous computation.
Markup Based on Selling Price (Margin)
Sales selling price ….………………………….………. ₱ 450.00
Cost of goods sold (cost).................……………. ₱ 300.00
Gross profit (markup)…………………………….…. ₱ 150.00

Markup in terms of percent based on cost

Sales selling price ….………………………….………. 100.00%
Cost of goods sold (cost).................……………. (66.67%)
Gross profit (markup)…………………..………….…. 33.33%
Markup Based on Selling Price (Margin)
𝑃
𝑅=
𝐵
𝐶𝑜𝑠𝑡
𝐶𝑜𝑠𝑡 𝑎𝑠 % 𝑜𝑓 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 =
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒
₱300
=
₱450
2
=
3
= 66.67%
Markup Based on Selling Price (Margin)
𝑃
𝑅=
𝐵
𝑀𝑎𝑟𝑘𝑢𝑝
𝑀𝑎𝑟𝑘𝑢𝑝 𝑎𝑠 % 𝑜𝑓 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 =
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒
₱150
=
₱450
1
=
3
= 33.33%
Markup Based on Selling Price (Margin)
Sales selling price ….………………………….. ₱ ? 100%
Cost of goods sold (cost).................…… (₱ 200.00) (70%)
Gross profit (markup)………………………… ? 30%

𝐶𝑜𝑠𝑡
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 = 70%
𝑀𝑎𝑟𝑘𝑢𝑝 = (30%)(₱285.71)
₱200
= 0.7
= ₱85.71
= ₱285.71
Sales selling price ….………………………….. ₱ 285.71 100%
Cost of goods sold (cost).................…… (₱ 200.00) (70%)
Gross profit (markup)………………………… ₱ 85.71 30%
Converting Markup Based on Cost to Markup
Based on Selling Price and Vice Versa
Rate Based Rate Based on
on Cost Selling Price
Sales selling price ….………………………….. 150% 100%
Cost ……………………………..................…… (₱100%) ?
Markup……………………………………………… 50% ?

𝑀𝑈𝑐𝑜𝑠𝑡 50% 1
𝑀𝑈𝑠𝑝 = = = = 33.33%
𝑆𝑃 𝑅𝑎𝑡𝑒 150% 3

Therefore, the cost rate = 100% − 33.33% = 66.7%

Converting Markup Based on Cost to Markup
Based on Selling Price and Vice Versa
In the same manner, if we know the 𝑀𝑈𝑠𝑝 , we can get the 𝑀𝑈𝑐𝑜𝑠𝑡 by
dividing the 𝑀𝑈𝑠𝑝 by the cost rate:

1
𝑀𝑈𝑠𝑝 33.33% 3 1 3 1
𝑀𝑈𝑐𝑜𝑠𝑡 = = = = = = 50%
𝐶𝑜𝑠𝑡 𝑅𝑎𝑡𝑒 66.67% 2 3 2 2
3
Markdown
If an item selling for ₱450.00 is marked to sell at ₱400, the markdown is
the difference between the original or old selling price and the new
selling price.

𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛 = 𝑂𝑙𝑑 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 − 𝑁𝑒𝑤 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒

= ₱450.00 − ₱400.00
= ₱50.00
Sales selling price ….………………………….. ₱ 450.00 100%
Cost of goods sold (cost).................…… (₱ 400.00) (88.89%)
Gross profit (markup)………………………… ₱ 50.00 11.11%
Markdown
% of New Selling Price:

𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛 ₱50 1
𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛 𝑟𝑎𝑡𝑒 = = = = 0.125 = 12.5%
𝑁𝑒𝑤 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 ₱400 8

% of Old Selling Price:

𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛 ₱50 1
𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛 𝑟𝑎𝑡𝑒 = = = = 0.1111 = 11.11%
𝑂𝑙𝑑 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 ₱450 9
Activity:
An item costs ₱1 000.00. Assume an original selling
price of ₱1 300.00. The selling price was raised to
₱1 400.00. It was tagged to sell at ₱1 200.00
a. How much is the mark-on? What percent of cost is it? Of
selling price?
b. How much is the additional markup?
c. How much is the markup cancellation?
d. How much is the markdown
Activity: Complete the table
Selling 𝑀𝑈𝑐𝑜𝑠𝑡 𝑀𝑈𝑠𝑝
Price Cost Markup
1 ₱150.00 ₱100.00 ________ _________ ________
2 ₱200.00 ₱100.00 ________ _________ ________
3 ₱350.00 ₱200.00 ________ _________ ________
Selling Price Cost Markup 𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑
₱450 ₱120
₱900 ₱200
₱300 ₱120
₱600 ₱230
₱400 30%
₱500 75%
₱500 30%
₱1 200 50%
BOARD WORK
𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑 𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑

60% 60%

40% 40%

100% 100%

200% 200%

150% 150%
BOARD WORK
Original Selling Price New Selling Price Markdown Markdown Rate
₱320 ₱280
₱625 ₱575
₱300 20%
₱475 30%
₱644 ₱84
₱1 500 ₱300
₱800 ₱320
₱1 093.75 ₱156.25
₱1 520 15%
₱3 250 20%
BOARD WORK
 Selling Price Cost Markup 𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑

a. ₱365 ₱300 ₱65 21.67% 17.81%

b. ₱845 ₱700 ₱145 20.71% 17.16%
c. ₱600 ₱480 ₱120 25% 20%
d. ₱499 ₱199 ₱300 150.75% 60.12%
e. ₱220 ₱120 ₱100 83.33% 45.45%
f. ₱500 ₱360 ₱140 38.89% 28%
g. ₱500 ₱135 20%
h. ₱1 200 ₱275 BONUS 55%
i. ₱399 ₱287.28 ₱111.72 38.89% 28%
j. ₱315 ₱151.20 ₱163.80 108.33% 52%
P R O B L E M S E T #1
 𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑 𝑴𝑼𝒄𝒐𝒔𝒕 𝑴𝑼𝒔𝒑

12% 10.71% 14% 12.28%

98% 49.49% 257.14% 72%

125% 55.56% 81.82% 45%

250% 71.43% No Markup 250%

No Markup 300% 300% 75%

P R O B L E M S E T #1
Original Selling Price New Selling Price Markdown Markdown Rate
₱415 ₱385 ₱30 7.23% / 7.79%
₱265 ₱200 ₱65 24.53% / 32.5%
₱165
₱285
₱177.60 ₱148 ₱29.60 16.67% / 20%
₱1890.70 ₱1 879 ₱11.70 0.62% / 0.62%
₱694.40 ₱620 ₱74.40 10.71% / 12%
₱583.20 ₱540 ₱43.20 7.41% / 8%
₱1 000 / ₱1 300 ₱700/ ₱1 000 ₱300 30%
₱600 / ₱750 ₱450/ ₱600 ₱150 25%
P R O B L E M S E T #1
Lesson 2: PROFIT OR LOSS
Determining the profit or loss involves a simple
addition and subtraction. The revenue is a plus
item. All expenses are minus items and,
therefore, deducted from the revenue. The
result is a profit if it is positive and a loss if it is
negative.
Income Statement for a Trading Firm
Sales is the account used to report the selling price
for the merchandise.
Gross sales refer to the total sales.
Net sales is arrived when sales discounts and sales
returns and allowances are deducted from the gross
sales.
Cost is how much the seller buys the item. It is
termed cost of goods sold or cost of sales.
Income Statement for a Trading Firm
An income statement is the financial statement
that shows the results of operation, that is, if it
earns a profit or incurs a loss for a given period
of time. Generally, a firm prepares financial
statement on a monthly basis. For tax purposes,
it is prepared quarterly and annually. It details
the sales, the operating expenses, and other
expense and/or other income, if any.
 Matatag Merchandising The cost of sales is the purchase price and other
Income Statement expenses incurred in buying the products that the
For the Year Ended June 30, 2017 business has to sell including the freight-in or
Sales ₱117 000 transportation of the goods it buys for resale.
Less: Cost of Sales ₱59 000
Gross Profit ₱58 000 Operating expenses are expenses incurred to run
Less Operating Expenses the business.
Communication Expense ₱ 1 000
Delivery Expense ₱ 5 000 Other income includes interest income and other
Rent Expense ₱ 5 500 incidental income the firm earns like rent income if
Salary Expense ₱ 8 300 it has a property that it rents out.
Bad Debt Expense ₱ 600
Other expense includes interest expense or
Office Supplies Expense ₱ 700
Store Supplies Expense ₱ 1 500
finance charges financial institutions charge firms
Depreciation Expense, for their services.
Furniture & Equipment ₱ 1 000 ₱23 600 The gross profit is at times referred to as gross
Operating Profit ₱34 400 margin that we have previously studied.
Add: Other Income
Interest Income ₱ 800 Operating profit/loss is gross profit less operating
Commission Income ₱ 1 500 ₱ 2 300 expenses.
Less: Other Expense
Interest Expense ₱ 1 200 ₱ 1 200 Net profit/loss is operating profit plus other
NET PROFIT ₱ 35 500 income less other expense.
Break-even Point
Break-even point is the point where a business
neither makes a profit nor a loss. At the break-
even point, a business’ revenue is equal to its
total costs. To determine the number of units to
be sold to break-even, we can assume that:
Sales = Variable Costs + Fixed Costs
Break-even Point
𝑃𝑥 = 𝑣𝑥 + 𝐹𝐶
where: P is the unit price;
x is the number of units;
v is the variable cost per unit; and
FC is the total fixed cost.
Break-even Point
Therefore, the break-even point in number of units
would be:
𝐹𝐶
𝑥=
(𝑃 − 𝑣)
The break-even point in pesos would be:

𝐵𝐸𝑃 𝑖𝑛 𝑃𝑒𝑠𝑜𝑠 = 𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐵𝐸𝑃 𝑈𝑛𝑖𝑡𝑠

Example:
Calculate the break-even point in sales units and sales dollars from following
information:
Unit price ₱20
Variable cost ₱8
Fixed Costs ₱12 000
𝐹𝐶
𝑥=
(𝑃 − 𝑣)
₱12 000 ₱12 000
𝐵𝐸𝑃 𝑖𝑛 𝑈𝑛𝑖𝑡𝑠 (𝑥) = = = 1 000 𝑢𝑛𝑖𝑡𝑠
₱20 − ₱8 ₱12

𝐵𝐸𝑃 𝑖𝑛 𝑃𝑒𝑠𝑜𝑠 = 𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐵𝐸𝑃 𝑈𝑛𝑖𝑡𝑠

𝐵𝐸𝑃 𝑖𝑛 𝑃𝑒𝑠𝑜𝑠 = ₱20 × 1000 = ₱20 000
Exercise:
The Excelsior Merchandising purchased merchandise costing ₱250 000.00 for the current month.
It paid ₱10 000.00 for freight (transportation) for the shipment of the goods from the seller to its
store. It insured the merchandise for ₱25 000.00. It sold 75% of the merchandise for
₱220 000.00. Calculate all costs associated with the merchandise. For the current month, it
incurred the following expenses:
Delivery Expense ₱15 000
General Administrative Expense ₱50 000
Miscellaneous Marketing Expense ₱75 000
Utilities Expense ₱30 000
For the current month, the firm earned interest on the promissory notes of its customers
amounting to ₱12 000.00. It paid interest to the bank on a loan it took amounting to ₱8 000.00.
Prepare the income statement of the Excelsior Merchandising for the current month.
 Excelsoir Merchandising
Income Statement
For the Year Ended June 30, 2017
Sales ₱220 000
Less: Cost of Sales
Freight (Transportation) ₱ 10 000
Cost of Items Sold ₱187 500 ₱197 500
Gross Profit ₱ 22 500
Less Operating Expenses
Delivery Expense ₱ 15 000
General Administrative
Expense ₱ 50 000
Miscellaneous Marketing
Expense ₱ 75 000
Utilities Expense ₱ 30 000 ₱170 000
Operating Profit (₱147 500)
Add: Other Income
Commission Income ₱ 12 000 (₱135 500)
Less: Other Expense
Insurance ₱ 25 000
Interest Loan Expense ₱ 8 000 ₱ 33 000
NET PROFIT (₱168 500)
Lesson 3: TRADE DISCOUNTS
A trade discount is a reduction from list price
granted to buyers. It could take the form of
volume discounts for large purchases, dealer’s
or distributor’s discounts, or special discounts
granted at the discretion of the seller. Trade
discount could either be a single discount or a
series of discounts.
Single Discount

𝑷 = 𝑩𝑹

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒

Example
Compute the discount for an item with a list price of ₱1 250.00 subject
to 15% discount. What is its net voice price?

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒

= (₱1 250.00)(15%)
= ₱187.50

𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 − 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡

= ₱1 250.00 − ₱187.50
= ₱1 062.50
Example
𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒 𝑁𝐼𝑃 𝑟𝑎𝑡𝑒 = 100% − 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
= 100% − 15%
= 85%
𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝑁𝐼𝑃 𝑟𝑎𝑡𝑒
= ₱1 250.00 × 85%
= ₱1 062.50
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 − 𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒
= ₱1 250.00 − ₱1 062.50
= ₱187.50
Series of Discounts
Example: Compute for the discount and the net invoice
price if an item listed at ₱1 250.00 is given 10% and 5%
discount.
List price ………………………………………… ₱1 250.00
Less (10%) (₱1 250 x 10%) ……………… ₱ 125.00
Difference ………………………………………. ₱1 125.00
Less (5%) (₱1 125 x 5%) ………………….. ₱ 56.25
Net Invoice Price …………………………….. ₱1 068.75
Series of Discounts
Example: Compute for the discount and the net invoice
price if an item listed at ₱1 250.00 is given 10% and 5%
discount.
List price ………………………………………… ₱1 250.00
First Balance(₱1 250 x 90%) …………… ₱1 125.00
Second Balance (₱1 125 x 95%) .…….. ₱1 068.75
Series of Discounts
Example: Compute for the discount and the net invoice price if
an item listed at ₱1 250.00 is given 10% and 5% discount.
𝑁𝐼𝑃 𝑅𝑎𝑡𝑒 = 𝐹𝑖𝑟𝑠𝑡 𝑁𝐼𝑃 𝑅𝑎𝑡𝑒 × 𝑆𝑒𝑐𝑜𝑛𝑑 𝑁𝐼𝑃 𝑅𝑎𝑡𝑒
= 90% × 95% = 85.5%
𝑆𝑖𝑛𝑔𝑙𝑒 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑅𝑎𝑡𝑒 = 100% − 𝑁𝐼𝑃 𝑅𝑎𝑡𝑒
= 100% − 85.5% = 14.5%
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝑆𝑖𝑛𝑔𝑙𝑒 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
= ₱1 250 × 14.5%
= ₱181.25
Series of Discounts
𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐿𝑖𝑠𝑡 𝑝𝑟𝑖𝑐𝑒 × 𝑁𝐼𝑃 𝑅𝑎𝑡𝑒
= ₱1 250.00 × 85.5%
= ₱1 068.75

𝑁𝑒𝑡 𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒 = 𝐿𝑖𝑠𝑡 𝑝𝑟𝑖𝑐𝑒 − 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡

= ₱1 250.00 − ₱181.25
= ₱1 068.75
Lesson 4: CASH DISCOUNTS
Cash discounts, unlike trade discounts, are
recorded in the accounting records either as
sales discounts in the books of the seller, or
purchase discounts in the books of the buyer.
These are deductions from the recorded net
voice prices.
Term of Sale or Purchase
The rate of cash discount is shown under the terms of
payment granted by the seller to buyer. These terms of sale or
2 𝑛 2 1 𝑛 𝑛
purchase are expressed as 10 , 30 ; 10 15 , 60 ; 𝑒𝑜𝑚 . The cash
discount is the sales discount granted by the seller to the buyer. For
the buyer, it is his or her purchase discount. eom means the buyer
has to pay the net invoice price by the end of the month of purchas.
𝑛
45
means that the buyer has 45 days from the date of purchase to
pay his/her account.
Term of Payment
2 𝑛
10
= 30
This is 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/her account
without additional charges. The 10-day period is called discount
period, and the 30-day period is called the credit period
Term of Payment
3 2 𝑛
10
= 15
= 60
This is read as “three ten, two fifteen, n sixty.” It 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.
Computing for Discount Period and Credit Period
2 𝑛
Example 1: Date of Invoice: March 2 Term: ,
10 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
Computing for Discount Period and Credit Period
2 𝑛
Example 1: Date of Invoice: March 2 Term: ,
10 30

b. To solve for the deadline for the discount period, we count 30

days from March 2. We cannot simply add 30 + 2 since the most
number of days in month is 31. As such, we do the following;
March has 31 days
Less Invoice date 2
No. of Days in March 29
April 1 (Deadline for the credit period)
Credit period 30
Computing for Cash Discounts
Example 1: Net Invoice Price: ₱3 060
2 𝑛
Date of Invoice: March 2 Term: ,
10 30
a. 𝐶𝑎𝑠ℎ 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝑁𝐼𝑃 × 𝐶𝑎𝑠ℎ 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒
= ₱3 060 × 2%
= ₱61.20
b. 𝑁𝑒𝑡 𝐴𝑚𝑜𝑢𝑛𝑡 𝐷𝑢𝑒 = 𝑁𝐼𝑃 − 𝐶𝑎𝑠ℎ 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
= ₱3 060 − ₱61.20
= ₱𝟐 𝟗𝟗𝟖. 𝟖𝟎
Computing for Discount Period and Credit Period
3 𝑛
Example 2: Date of Invoice: September 28 Term: ,
15 60

a. To solve for the deadline for the discount period

September has 30 days
Date of Invoice September 28
Days in September 2
October 13 (Deadline for the discount period)
Discount period 15 days
Computing for Discount Period and Credit Period
3 𝑛
Example 2: Date of Invoice: September 28 Term: ,
15 60
a. To solve for the deadline for the credit period
September has 30 days
Date of Invoice September 28
Days in September 2
October 31
33
November 27 (Deadline for the credit period)
Discount period 60 days
Computing for Cash Discounts
Example 2: Net Invoice Price: ₱5 000
3 𝑛
Date of Invoice: September 28 Term: ,
15 60
a. 𝐶𝑎𝑠ℎ 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝑁𝐼𝑃 × 𝐶𝑎𝑠ℎ 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒
= ₱5 000 × 3%
= ₱150
b. 𝑁𝑒𝑡 𝐴𝑚𝑜𝑢𝑛𝑡 𝐷𝑢𝑒 = 𝑁𝐼𝑃 − 𝐶𝑎𝑠ℎ 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
= ₱5 000 − ₱150
= ₱𝟒 𝟖𝟓𝟎. 𝟎𝟎