Terms of Sale
A business establishment may offer its customers various terms to settle accounts.
This is preferable by most businesses and therefore customers are encouraged to make cash payments. They are usually offered a lower payment amount for goods bought for cash.
Customers are allowed to pay at intervals over a short- term, usually one to three months to settle outstanding balances.
Hire-purchase is a long term payment plan e.g. 24 – 36 months. Interest is charged to the customer increasing the amount owed.
A cash discount is a reduction in the price of a good that is paid for immediately or over a short period of time by a customer. For example, if a an appliance store offers 5% discount on items bought for cash then 5% of the sale price would be deducted from the actual bill
A trade discount is the reduction in the price of a good given by a manufacturer or a wholesaler to a retailer to allow the retailer to make a profit or to encourage bulk buying. Thus if an appliance manufacturer offers 10% trade discount to retailers then 10% of the catalogue price or the quoted price would be deducted from the retailers’ actual bill.