TERMS OF SALES

◦Terms of sales refers to

Define the
term “ terms the ways that payment
of sales.” for purchases are made.
 (i) Cash

(ii) Credit

(iii) Hire Purchase

TYPES OF TERMS OF
SALES: (iv) Layaway

(v) Consignment

(vi) Cash and trade discounts

(i) Cash
(ii) CREDIT

Definition Advantages Disadvantages

(iii) Hire Purchase
Definition Advantages Disadvantages
(iv) Lay-a-way
Definition Advantage Disadvantage
 (v) Cash discount
◦ A cash discount is an amount given to the
Advantages of Disadvantages of
buyer for prompt payment. If a large
cash discount cash discount purchase is made, the seller may give the
buyer a certain percentage off the cash
price.
Encourages prompt A decrease in actual ◦ E.g. A customer may purchase goods to the
payment price which reduces the
value of $5 000 and since the customer
seller’s profits
pays promptly, the seller will give the buyer
5% off the cash price, therefore the buyer
pays 95% of $5000 = $4750.
 (v) Trade discount
Advantages of Disadvantages of ◦ A trade discount is a discount given to a
trader or merchant. A trader or
Trade discount cash discount
merchant is anyone who buys goods to
resell, for example, a wholesaler or
retailer.
Allows the merchant to A decrease in actual
make a profit. price which reduces the ◦ E.g. A soft drink merchant may purchase
wholesaler’s profits. 50 cases of soft drinks from the
It assists in the manufacturer at $20. 00 per case and
movement of stock. retails them at $25.00 per case.
 ◦ Consignment is an arrangement whereby
goods are placed in the possession of
another party to sell. This person, known
as the consignor, receives a percentage of
the revenue from the sale.
(vi) Consignment ◦ Example: Consignment is evident in
international trade whereby the payment
is only passed to the exporter after the
goods have been sold by the overseas
distributor to the end customer.
 ◦A cash discount is given to the
Difference customer for prompt payment while
a trade discount is given to
between a merchants and traders.
cash discount
and a trade
◦NOTE: A trader or a merchant is
discount. anyone who buys goods to resell.
 ◦ Lay-a-way is where the buyer does not receive the
goods until they are completely paid for. The

Explain the business takes no risk because even if the buyer

fails to complete all payments, the seller retains
difference the goods.

between hire ◦ Conversely, hire purchase is where the buyer

purchase and receives the goods before they are completely paid

lay-a-way. for. The business takes a risk because if the buyer

fails to complete all payments, the seller will have
to repossess the item on hire purchase.
THE END