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
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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

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 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

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 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

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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

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 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?

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