Discount

Discount
 Discount is the amount deducted from the selling price of a product or
service.
Types of Discount
1. Trade Discount – is the discount offered by the manufacturer or
wholesaler to encourage resellers (costumers) to purchase a product. It
is usually stated in a specific amount or percentage discount.
2. Cash Discount – is the discount given to persuade costumers to pay in
cash immediately or within a specified time.
 Trade Discount
 Trade discount is applied on the list or price tag. The amount of the trade
discount will depend on the trade discount rate.
𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡= 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒× 𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
 The price after deducting the trade discount is known as the net price.
𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒=𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 −𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒=𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 −(𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒× 𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒=𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒(1 − 𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
 Example 1:
 Find the net price of a tablet that is listed at Php7 999 and has a
trade discount rate of 10%.
Solution:
𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡= 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒× 𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
¿ 𝑃h𝑝 7 999
× 0.10
¿ 𝑃h𝑝 799.90
𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒=𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 −𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
¿ 𝑃h𝑝 7 999− 𝑃h𝑝799.90
¿ 𝑃h𝑝 7 199.10
 Example 2:
 In celebration of your store’s 3rd year anniversary, you decided to sell cropped
legging pants for Php990 less 20%. The price net of cropped legging pants is reduced
to Php590 to improve its anniversary sales. Find the additional rate of discount given
by the store.
Solution:
𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒=𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑃𝑟𝑖𝑐𝑒(1 −𝑇𝑟𝑎𝑑𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
¿ 𝑃h𝑝990 (1 −0.20)
¿ 𝑃h𝑝792
𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒=𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒(1 − 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
𝑃h𝑝590 ¿ 𝑃h𝑝792 (1 − 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
¿1− 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
0.7449¿1− 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒 ¿ 1−0.7449 ¿ or
 Cash Discount
 Cash discount is applied on the net price, the price after all trade discount have
been deducted.
 The amount of cash discount will depend on the dating methods used, and the
terms and date of payment stated.
 The dating methods can be ordinary (invoice date), at the end of the month, or
upon receipt of goods.
 Terms of payment may be given as 10/15, 5/30 or n/60.
10/15 means that the costumer will get a 10% cash discount if she pays within 15 days
5/30 means that the costumer will get a 5% cash discount if she pays within 30 days
n/60 means that the costumer will pay the net amount in full within 60 days.
Formulas:
𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡=𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒 ¿
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒=𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 − 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 ¿
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒=𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 −( 𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒)
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒=𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒(1 − 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 )
 Example 1:
 Braniac Enterprises received an invoice Php7 500 for school supplies dated 4
July with terms of 5/15, n/30. If the invoice is paid on 15 July, how much
cash discount did the Braniac Enterprises receive from the supplier? How
much should Braniac Enterprises pay?
Solution:
A discount of 5% will be given because the invoice was paid within 15 days.
𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡=𝑁𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 × 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
¿ 𝑃h𝑝 7 500× 0.05
¿ 𝑃h𝑝 375
𝑃𝑎𝑦𝑚𝑒𝑛𝑡=𝐼𝑛𝑣𝑜𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒− 𝐶𝑎𝑠h 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
¿ 𝑃h𝑝 7 500− 𝑃h𝑝 375
¿ 𝑃h𝑝 7 125