Cash Discounts ~ Ordinary Dating Methods

Calculating Net Cost after discounts:  Cash Discounts: offered by seller to encourage prompt payment  Net = List – Trade – Cash Cost Price Discount Discount

The Ordinary Dating Method  Notation: 2/10, n/30 or 2/10, net 30  Means: 2% discount if paid in 10 days, the total is due in 30 days.  AFTER 10 days, 2% discount does not apply!  AFTER 30 days, payment is overdue and late charges may be added!

To determine if a cash discount is earned: Check the date on the invoice and consider the # of days the discount is in play. You must know how many days are in each month. (See p 250)

Examples:  An invoice dated June 8 offers terms of 3/15, net 30. Find (A) the last date on which the 3% discount can be taken and (B) the net payment date.  An invoice is received for $ , dated March 21, and offers 3/15, n/30. If the invoice is paid on April 4 and the shipping & insurance charges are , find the amount due.

Postdating & Cash Discounts  Invoices may be postdated to offer more time for the discount.  i.e. 07/25 AS OF 08/01  Means: invoice was dated July 25, but the discount and net payment date are calculated as of Aug 1.

 An invoice for Waterford Crystal is dates Aug 24 AS OF Sept 1 with terms of 1/10, n/30. Find (A) the last date on which the cash discount may be taken and (B) the net payment date.  An invoice is dated April 14 and offers terms of 3/10, 2/30, 1/40, n/60. Find (A) the 3 final dates of each discount and (B) the net payment date.

IF no “Net payment period is given…  Then the net payment is due 20 days after the last discount dat e.