14.1-14.3 Trade Discounts

Net price formula

List price (net price rate)

steps to calculate net price by using the net price factor (compliment)

1. calculate net price rate, the complement of the trade discount rate 2. calculate net price

net price rate formula (the complement)

100% - Trade discount rate

cash discount

A deduction that a vendor allows on the invoice amount to encourage prompt payment

invoice

A form describing the goods or services sold, the quantity, and the price

End of Month dating (EOM)

Discount date is calculated from the end of the month. With EOM dating, the net period is an additional 20 days. 26th or later is considered the next month. For example, an invoice dated June 11 with terms of 8/10 EOM has a discount date of July 10 (10 days after the end of June).

ordinary dating

Terms of payment on an invoice from a supplier which grants a cash discount if a bill is paid within a certain number of days.

net price

The amount a business actually pays for the merchandise after the discount has been deducted

net price rate

The complement of the trade discount rate. The percent of the list price a business pays for merchandise.

Trade discount rate formula

Trade discount / List price

trade discount formula

Trade discount = List price x Trade discount rate

chain discounts

a series of trade discounts a supplier may offer to sell out a discontinued item or to encourage a customer to place a larger order

trade discount

reductions from manufacturer's list price given to retail businesses that are in the trade so that those businesses can sell the product or service for a profit.