Terms of Trade and Abbreviations
It is an amount of money which is taken off the price of a product in order to encourage the bulk purchase and immediate payment.
Discount can be any of the following:
1. Trade Discount: This allowance is given by the manufactures or wholesalers to the retailers to induce them to buy goods in large quality.
2. Cash Delivery: It is a deduction granted to buyers for paying their bills within a specified period. It is given to buyers in order to encourage prompt payments.
3. Quantity Discount: This type of discount is given to buyers who purchase goods in large quantity in a single delivery or single order.
4. Seasonal Discount: It is given to customers who places order during slack season. This discount is given to stimulate sales at special times of the year.
Terms of Payment
a. Prompt Cash: Goods sold on this condition must be paid for within a few days. The buyer is expected to pay up the money on time usually less than a week.
b. Cash on delivery (C.O.D): The buyer must pay before the goods are delivered. This service is usually provided by the post office to assist, mail order business. The payments and collection are through the post office. The buyer pays the postman who delivers the goods.
c. Cash with order (C.W.O): The payment for the goods is made as soon as the order for the goods is placed. The buyer includes the money when the order is sent to the supplier/seller.
d. Spot Cash: This system allows the payment to be made immediately after sales. The buyer pays on the spot as soon as the goods are handed over to him
e. Monthly account: This method allows the buyer to make monthly payments instead of for each individual transaction. So at the end of the month, the buyer is required to make payment for all the goods bought within that period.
- List five documents used in buying and selling
- Give the full meaning of E & OE and explain what it stand for
- Explain the following
(a) Net 3 months
(b) 2% Cash discount
(c) 5% Trade discount
4. Compare an invoice and a proforma invoice
5. Differentiate receipt and invoice
6. Differentiate prompt Cash from Spot Cash