Cash Discount Terms and Calculations

The video tutorial covers cash discounts, explaining how manufacturers offer them to encourage prompt payment. It details the components of cash discounts, including rate discount, discount period, and credit period. Three types of cash discounts are discussed: ordinary dating, end of month dating, and receipt of goods dating, each with examples. Formulas for calculating cash discounts are provided, along with practical examples. The tutorial concludes with a summary of the types of cash discounts.

What is the primary purpose of offering cash discounts to retailers?

• To reduce the product price

• To increase the invoice amount

• To encourage prompt payment

• To extend the credit period

What does the discount period specify?

• The time period when a cash discount can be applied

• The product warranty period

• The shipping duration

• The total invoice amount

Which of the following is NOT a type of cash discount?

• End of month dating

• Ordinary dating

• Receipt of goods dating

• Seasonal dating

In ordinary dating, what is the basis for payment terms?

• The day goods are received

• The invoice date

• The shipping date

• The last day of the month

If an invoice states '2/10, n/30', what does it mean?

• 2% discount if paid within 10 days, net due in 20 days

• 2% discount if paid within 20 days, net due in 30 days

• 2% discount if paid within 30 days, net due in 10 days

• 2% discount if paid within 10 days, net due in 30 days

What does 'end of month dating' imply?

• The invoice date is the first day of the month

• The invoice date is the day payment is made

• The invoice date is the day goods are received

• The invoice date is shifted to the last day of the month

In end of month dating, if an invoice is dated April 20 with terms '1/10 EOM', when does the discount period end?

• April 30

• April 10

• May 10

• May 20

What is the key feature of receipt of goods dating?

• Discount period starts the day after goods are received

• Discount period starts on the last day of the month

• Discount period starts on the invoice date

• Discount period starts on the payment date

For an invoice dated April 20 with terms '3/10 ROG', if goods are received on May 10, when does the discount period end?

• April 10

• May 30

• April 30

• May 20

How is the amount payable calculated?

• Net price plus cash discount

• Net price minus cash discount

• Net price divided by cash discount

• Net price times cash discount