LESSON 2: DISCOUNTS

DISCOUNT

•is a reduction from a certain

price or amount
Two kinds of discount

1. Trade discount
2. Cash discount
1. Trade discount

•is a deduction from the list price

or catalogue price granted to
customers to encourage purchase
of goods or merchandise in big
quantities or volume.
List price

•is the manufacturer’s suggested

retail price of a product.
1. Trade discount

•could either be a single discount

or series of discounts.
Single Discounts
•Computing for discounts makes use of
the basic percentage formula P = BR
where the base is the list price, the
rate is the discount rate, and the
percentage is the discount. As such,
P = BR
Discount = List Price x Discount Rate
 Single Discounts
Example #1: Compute the discount for an item
with a list price of ₱1,250 subject to 15%
discount. What is its net invoice price?
Given:
List price = ₱1,250;
Discount rate = 15%.
Find:
a. Discount
b. Net Invoice Price
 Single Discounts
Example #1:
List price = Php 1,250
Discount rate = 15%

Discount = List Price x Discount rate

Discount = Php 1,250 x 15%
Discount = Php 187.50
 Single Discounts
Net Invoice Price = List Price – Discount
Net Invoice Price = Php 1,250 – Php 187.50
Net Invoice Price = Php 1,062.50
 Single Discounts
Net Invoice Price Rate = 100% - Discount rate
Net Invoice Price Rate = 100% - 15%
Net Invoice Price Rate = 85%

Net Invoice Price = List price x NIP rate

Net Invoice Price = Php 1,250 x 85%
Net Invoice Price = Php 1,062.50
 Series of Discounts
Example # 2: Compute for the discount and the
net invoice price if an item listed at ₱1,250 is
given at 10% and 5% discount.
Given:
List price = ₱1,250;
Discount rates = 10% and 5%
Find:
a. Discount
b. Net Invoice Price
 Series of Discounts
Example # 2: (1st Method)
List Price Php 1,250
Less: 10% discount (Php 1,250 x 10%) 125
Php 1,125
Less: 5% discount (Php 1,125 x 5%) 56.25
Net Invoice Price Php 1,068.75
Discount = Php 125 + Php 56.25 = Php 181.25
 Series of Discounts
Example # 2: (2nd Method)
100% - ((100% - 10%) X (100% - 5%))
100% - (90% x 95%)
100% - 85.5% = 14.5%
Discount = Php 1,250 x 14.5% = Php 181.25
Net Invoice Price = Php 1,250 – Php 181.25
Net Invoice Price = Php 1,068.75
2. Cash discount

•a deduction from the selling price

granted to customers to
encourage prompt payments of
accounts.
 2. Cash discount
Example #3: On July 1, ABC Co. bought merchandise
to XY Corp. with a purchase price of Php 70,000. ABC
Co. paid the XY Corp. on July 5. Terms: 3/10, n/30.

• July 1………….. July 11 July 12………….. July 31

3% discount no discount
 2. Cash discount

Example #3:
Purchase price Php 70,000
Less:3% x Php 70,000 2,100
Purchase price Php 67,900
 2. Cash discount
DETERMINING THE DISCOUNT PERIOD AND DUE
DATE OF A PURCHASE OR SALES TRANSACTIONS

1. Purchase or Sales transaction date is August

15. Terms: 2/10, 1/15, n/30
 2. Cash discount
1. Purchase or Sales transaction date is August 15. Terms:
2/10, 1/15, n/30
Term 30 days
Less: Remaining days for August
Number of days in August 31
Less: Date of transaction 15 16 days
Payment date due next month 14 days Sept. 14
 2. Cash discount
1. Purchase or Sales transaction date is August 15. Terms: 2/10, 1/15, n/30
Therefore,
Aug 15………….. Aug 25 Aug 26………….. Aug 30 Aug 31…….. Sept.14
2% discount 1% discount no discount

• Due date for payment: Sept. 14 (without discount)

• If paid from August 15 to August 25: with 2% discount
• If paid from August 26 to August 30: with 1% discount
 2. Cash discount
2. Purchase or Sales transaction date is
September 15. Terms: 3/20, n/60
Term 60 days
Less: Remaining days
Number of days in September 30
Less: Date of transaction 15
Remaining days for September 15
Add: Number of days in next month (Oct.) 31 46 days
Payment date 14 days Nov. 14
 2. Cash discount
2. Purchase or Sales transaction date is September 15. Terms:
3/20, n/60

Therefore,

Sept 15………….. Oct 5 Oct 6………….. Nov 14

3% discount no discount