Trade

Discount
s
 Learning Objectives:
At the end of this lesson, the student should be able
to:
1.Compute for the net invoice price (NIP) using a single
trade discounts;
2.Compute for the NIP using a discount series;
3.Compute for a single equivalent discount rate for a
discount series; and
4.Compute for the NIP rate and obtain the NIP using
said rate.
 Trade Discounts

Trade Discounts
 Is a reduction from list price granted to
buyers
 Single
Discount
s
 Single Discounts
Formula for Single Discount.
P = BR
Discount = List Price x Discount Rate.
 Single Discounts
Example:
Compute for the discount for an item with a list price of
Php1,250.00 subject to a 15% discount. What is the net
Invoice price?
Given: List Price = Php 1, 250.00
Discount Rate = 15%
Find:
a. Discount
b. Net Invoice Price
 Single Discounts
Example:
Given: List Price = Php 1, 250.00
Discount Rate = 15%
Solutions:
a. Discount = List Price x Discount Rate
= Php 1, 250 x 15%
= Php 187.50
 Single Discounts
Example:
Given: List Price = Php 1, 250.00
Discount Rate = 15%
Discount = Php 187.50
Solutions:
b. Net invoice Price = List Price – Discount
= Php 1, 250 – 187.50
= Php 1, 062.50
 Single Discounts
Example:
Another way of computing for the NIP is to multiply the list
price by the NIP rate.
Formula: NIP Rate = 100% - Discount Rate
NIP Rate = 100% - 15%
NIP Rate = 85%
Solutions:
b. Net invoice Price = List Price x Discount Rate
= Php 1, 250 x 85%
= Php 1, 062.50
 Single Discounts
Example:
To get the discount, we deduct the net invoice price from the
list price:
Solutions:
b. Discount = List Price - Net invoice Price
= Php 1, 250 - Php 1, 062.50
= Php 187.50
Series Of
Discount
s
 Series of Discounts

In certain instances, a seller grants additional discounts other

than the discount ordinarily given by him or her. For
instance, aside from the regular 10% discount, a seller may
grant a special additional discount of 5%. The series of
discounts is, therefore 10% and 5%. This is not, however,
equivalent to 15% as we shall see later.
 Series of Discounts
Example:
Compute for the discount and the net invoice price if an item
listed at Php 1. 250.00 is given a 10% and 5% discount.
Given: List = Php 1. 250.00
Discount Rate = 10% and 5%
Find:
a. Discount
b. Net Invoice Price
 Series of Discounts
Example:
Solution:
We first multiply the list price by the first discount rate. To
get second discount, multiply the difference between the list
price and the first discount, and the second discount rate. We
then deduct the second discount from the said difference to
get the net invoice
 Series of Discounts
Example: Method 1
Solution:
List Price ……………………………………..…………..
Php 1 250.00 Php 125.00
Less 10% ..…………………………………………………
Php 1 125.00
Php 56.25
Difference……………………………………………….…
Less 5% ……………………………….…………….……..
Php 1 068.75
Net Invoice Price ………………………….……….
 Series of Discounts
Example: Method 1
Solution:
Our total discount is equal to the first discount plus the
second discount.
Total discount = Php 125.00 + Php 56.25
= Php 181.25
 Series of Discounts
Example: Method 2
Solution:
(1). Deduct the first discounts rate from 100% and multiply
the list price by the rate obtained.
100% - 10% = 90%
Multiply the list price by the first balance rate obtained in
step 1.
List price ……………………………. Php 1 250.00
x 90%
First Balance ……………………. Php 1 125.00
 Series of Discounts
Example: Method 2
Solution:
(2). Deduct the second discounts rate from 100% and
multiply the first balance obtained in (1) by the second
balance rate obtained.
100% - 5% = 90%
First Balance ……………………. Php 1 125.00
Second balance rate x 95%
Net Invoice Price ……………. Php 1 068.75
 Series of Discounts
Example: Method 2
Solution:
This method involves a process similar to the use of the net
invoice price rate (NIP rate) applied to the list price to get
the NIP. Our discount is still equal to the list price less the
NIP.
Discount = List Price – NIP
= Php 1 250 – Php 1 068.75
= Php 181.25
 Series of Discounts
Example: Method 3
Solution:
Using this method, we will convert the series of discounts to
a single equivalent rate.
Step 1: Deduct the series of discounts individually from
100%.
(a) 100% - 10% = 90%
(b) 100% - 5% = 95%
 Series of Discounts
Example: Method 3
Solution:
Using this method, we will convert the series of discounts to
a single equivalent rate.
Step 2: Multiply the resulting products by themselves to give
us the net invoice price rate.

(a) x (b) = 90% x 95% = 85.5% (NIP)

 Series of Discounts
Example: Method 3
Solution:
Using this method, we will convert the series of discounts to
a single equivalent rate.
Step 3: Deduct this NIP rate from 100% to get the single
equivalent discount rate.
100% - 85.5% = 14.5% (Single Equivalent Rate)
Take note that if we add the NIP rate and single equivalent
discount rate, we will get 100%
 Series of Discounts
Example: Method 3
Solution:
To get the discount, we multiply the single equivalent
discount rate by the list price.
Discount = List price x Single equivalent discount rate
= Php 1 250 x 14.5%
= Php 181. 25
 Series of Discounts
Example: Method 3
Solution:
To get the NIP, we multiply the list price by the NIP rate
obtained in step (3) above.
NIP = List Price x NIP rate
= Php 1 250 x 85.5%
= Php 1 068.75
 Series of Discounts
Example: Method 3
Solution:
To prove, we deduct our discount from the list price.
NIP = List Price – Discount
= Php 1 250 – Php 181.25
= Php 1 068.75