CASH DISCOUNT

Term of sale or purchase

The rate of cash discount is shown under the terms of payment granted by
the seller to the buyer. These terms of sale or purchase are expressed as
2 𝑛 2 1 𝑛 𝑛 𝑛
, ; 10,15,60 ; 𝑒𝑜𝑚;45. The cash discount is the sales discount granted by
10 30
the seller to the buyer. Take note of the following terms of payment.

2 𝑛
1. ,
10 30

This is read as “two ten, n thirty ” which means the buyer gets 2%
discount if he or 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. The 10-day period is called the discount period
and the 30-day period is called the credit period.

3 2 𝑛
2. , , ,
10 15 60

This is read as”three ten; two fifteen, n sixty.” It means that the
buyer will be given l3% discount if he or she pays within 10 days
from the date of invoice or 2% discount if he or she pays within 15
days from the invoice date or if he or she failed to take advantage
of the discounts being offered, he or she has to pay within 60 days
from the date of invoice.

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.

𝟐 𝒏
1. Date of invoice: March 2 Term: ,
𝟏𝟎 𝟑𝟎

a. To solve for the deadline for the 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

b. To solve for the credit period, we count 30 days from March 2. We

cannot simply add 30+2 since the most number of days in a month is
31. As such, we do the following:

March has 31 days

Less: invoice date 2
No. of days left in March 29 days
April 1 deadline for the credit period
Credit period 30 days
We first deduct the invoice date from the number of days in March which
is 29. Then, we subtract 29 from 30 to get April 1 the deadline for the
credit period.

If the buyer pays between March 2 and March 13, that 18, up to March 12,
he or she gets the 2% discount If he or she pays on March 13 or later;
he or she gets no discount because the discount period has lapsed. To
pay the account, the buyer has until April 1, the deadline for the
credit period.

COMPUTING FOR CASH DISCOUNTS

TO COMPUTE FOR CASH DISCOUNTS, WE SIMPLY MULTIPLY THE net invoice price
by the cash discount rate. Study the example:

Net invoice price = ₱3060.00

Invoice date = March 2
2 𝑛
Term = 15,60

Find:
a. Cash discount
b. Net amount due

Solutions:
a. Cash discount = NIP x Cash discount rate
= ₱3 060 x 0.02
= ₱61.20
b. Net amount due = NIP – Cash discount
= ₱3 060 - ₱61.20
= ₱ 2 992.80