Rule invoices and enter the following sales, assuming that you are

the selling merchant.

11. To W. K. Sears,

Elgin, Illinois.
Sept. 10.

45 No. R 721 Body Brussels Rugs 6 × 9 ft. each 32 No. R 731 Body Brussels Rugs 8 x 10 ft. each 36 No. R 741 Body Brussels Rugs 9 × 12 ft. each 25 No. R 751 Body Brussels Rugs 11 x 13 ft. each

12. To C. B. Perkins,

Amherst, Minn.
Sept. 12.

$31.75

37.50

41.25

48.80

CHAPTER XVI

COMMERCIAL DISCOUNTS

Classes of Commercial Discount. Commercial discounts are of three general classes; namely, Cash Discount, Trade Discount, and Quantity Discount.

CASH DISCOUNT

152. Purpose of Cash Discount. In order to encourage the prompt settlement of accounts, merchants frequently offer to deduct a certain per cent of the bill if it is paid within a fixed number of days. The deduction for prompt payment is called cash discount.

153. Terms. The terms state the discounts offered, and the time when the bill is due and payable without any deduction for discount. The terms are usually indicated in the following manner:

2/10; 1/30; N/60.

The figure at the left of the line indicates the rate of discount offered; the figure at the right of the line indicates the number of days within which payment must be made in order to obtain the discount. Thus, the terms stated above mean:

2% discount from the face of the bill, if paid within 10 days;
1% discount from the face of the bill, if paid after 10 days but
before 30 days;

No discount after thirty days and the bill is due in 60 days.
The terms are read as follows: "Two, ten; one, thirty; net, sixty."

154. Definitions. The amount of the purchase before subtracting the discount is called the list price.

The remainder after subtracting the discount is called the net price. The rate of discount is stated as a per cent of the list price.

155. Cash Discount Illustrated. The terms of the invoice on page 177 were 2/10; N/30.

In order to obtain the discount, Scobey & Co. must pay the bill

on or before June 20, 1922.

The bill is due and payment is expected in full on July 10, 1922. No discount is allowed if payment is made between June 20 and July 10.

State a rule for finding discount and net price by this method. (Note that five mills or more in the discount are considered a cent. Thus, $1.905 is considered $1.91.)

State a rule for computing the net price by this method.

157. The Advantages of Cash Discount. Cash discounts may benefit both the purchaser and the seller. Merchants offer cash discounts because they encourage prompt payments, and thus decrease:

a. the loss from bad debts;

b. the cost of collecting accounts;

c. the amount of capital tied up in outstanding accounts.