Discounts

Topic Content:

What is a Discount?

A discount can be defined as the reduction in the catalogue price of an article or goods in order to encourage bulk purchases and prompt payment.

Reasons for Granting Discount:

1. To encourage large quantity purchases.
2. Help to avoid the risk of bad debts.
3. To encourage prompt payment.
4. Discount attracts Customers.
5. It provides for the buyer’s profit margin.
6. To avoid tying down business capital.

Types of Discounts:

Discount is divided into two (2), namely:

(i) Trade discounts
(ii) Cash discounts

1. Trade Discount:

This is an allowance made by the manufacturer or wholesaler to the retailer in the form of a reduction from the catalogue prices of goods supplied. It is an inducementa thing that persuades or leads someone to do something. More to the customer to buy goods in large quantities. It is