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The Mathematics of Buying and Selling
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UNIT II
MATHEMATICS OF BUYING AND SELLING
Every business has its own version of buying and selling. As an entrepreneur your end goal is to make a profit out of a business and
this can be achieved only if you can sell at a higher price than what you can actually spent. To be able to make sure that you earn more
than what you spent, you should understand the mathematics of Buying and Selling.
Lesson 2.1 to 2.2
Trade Discounts
Cash Discounts
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Our Topics
Trade
Discounts
Cash
Discounts
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TRADE DISCOUNT
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 A deduction from the list price of goods
allowed by a manufacturer or wholesaler to
D
a retailer.
TRADE DISCOUNT
 Percentage of the discount.
LIST PRICE
 Price of the product without discounts.
Net Price
 Actual price a customer pays after deducting
any trade discount.
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TRADE DISCOUNT FORMULA
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D = discounted price
D
L = list price
1-t = trade discount (in decimals)
EXAMPLE NO. 1
Jennifer is in a grocery store and she decided that
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she will buy a box of canned
tuna with a list price
of Php680 and a trade discount of 25%. How
much is the Net Price that Jennifer needs to pay?
EXAMPLE NO. 2
XYZ Manufacturing Co. can cover its cost and
make a reasonable profit
if they sell their
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rocking chairs at Php350 each. At what price
should the product be listed so a discount of
35% can be allowed?
EXAMPLE NO. 3
A pair of branded running shoes is listed on a
wholesaler’s catalog atePhp4,210. The branded
running shoes is sold to a retailer for a net
price of Php3,800. What trade discount rate
was given by the wholesaler to its retailer?
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CASH DISCOUNT
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 An incentive that a seller offers to a buyer in
return for paying a bill before the scheduled
andue
incentivedate.
that a seller offers to a buyer in return for paying a bill before the scheduled due date
 Usually given to buyers paying within a
specified time.
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CASH DISCOUNT FORMULA
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Cash
discount
=
Price
x
Discount
rate
an incentive that a seller offers to a buyer in return for paying a bill before the scheduled due date
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Usually follows the format: 2/10, n/30
n/30
 Means that you will get 2/10,
a discount
of 2% if you clear your
account within 10 days. In other words, if you make the payment
2% discount allowed if paid within 10 days, otherwise net (full) payment due within 30 days (of the invoice date).
within 10 days from the date of the invoice, you will be eligible for
a 2% discount.
 You must pay the bill within 30 days to avoid interest charges.
2/10, n/30
2% discount allowed if paid within 10 days, otherwise net (full) payment due within 30 days (of the invoice date).
EXAMPLE:
Ms. Daisy received an invoice amounting to Php 350,000
dated 22 November 2020 with terms [ 2/10, n/30]. He
paid the whole amount on 30 November 2020. How
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much did Ms. Daisy effectively paid for the bill?
 Date of Invoice: 22nd November 2020
 Day 1 of the cash discount period: 23rd November 2020
 Last day of the Cash discount period: 31st November 2020
 Date of payment: 30th November 2020
Cash discount = Price x Discount rate
= Php350,000 x 2/100
= Php7,000
Amount effectively paid = Bill value - Cash
discount
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= Php350,000 – Php7,000
= Php343,000
Ms. Daisy effectively paid Php343,000 on 30 November 2020
Usually follows the format: [ 2/10, n/30 R.O.G]
2/10, n/30
 Means that you will get a discount of 2% if you make the
payment within the first 10 days after the goods are received.
2% discount allowed if paid within 10 days, otherwise net (full) payment due within 30 days (of the invoice date).
 Cash Discounts are computed base upon when the goods are
received.
2/10, n/30
2% discount allowed if paid within 10 days, otherwise net (full) payment due within 30 days (of the invoice date).
EXAMPLE:
Ms. Majorie received an invoice for Php225,000 dated 10th
November 2020 with terms [ 2/10, n/30 R.O.G] for a shipment that
arrived on 5th of December 2020. Ms. Majorie paid for the bill in full
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on the 10th of December 2020. How
much did Ms. Majorie
effectively paid for the bill?
 Date of Invoice: 10th December 2020
 Day 1 of the cash discount period: 6th December 2020
 Last day of the Cash discount period: 15th December 2020
 Date of payment: 10th December 2020
Cash discount = Price x Discount rate
= Php225,000 x 2/100
= Php4,500
Amount effectively paid = Bill Value - Cash
discount
e
= Php225,000 – Php4,500
= Php220,500
Ms. Majorie effectively paid Php220,500 on 10 December 2020
Usually follows the format: [ 2/10, n/30 E.O.M.]
2/10, n/30
 Means that you will get a discount of 2% if you pay your
account
10 days
ofpayment
next month.
2% discount allowed
if paidwithin
within 10the
days,first
otherwise
net (full)
due withinIn30other
days (ofwords,
the invoice date).
if you make the payment within the first 10 days of next month
from the date of the invoice, you will be eligible for a cash
discount.
 You must pay the bill within the first 30 days of next month to
avoid interest charges.
2/10, n/30
2% discount allowed if paid within 10 days, otherwise net (full) payment due within 30 days (of the invoice date).
EXAMPLE:
Ms. Aicel received an invoice for PHP425,650 dated 05th October
2020 with terms [ 2/10, E.O.M ]. She paid the whole amount on 10th
November 2020. How much did Ms. Aicel effectively paid for the
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bill?
 Date of Invoice: 5th October 2020
 Day 1 of the cash discount period: 1st November 2020
 Last day of the Cash discount period: 10th November 2020
 Date of payment: 10th November 2020
Cash discount = Price x Discount rate
= Php425,650 x 2/100
= Php8,513
Amount effectively paid = Bill Value - Cash
discount
e
= Php425,650 – Php8,513
= Php417,137
Ms. Aicel effectively paid Ph417,137 on 10 November 2020
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DIFFERENCES OF TRADE DISCOUNTS AND CASH DISCOUNTS
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