Terms of Sale

A business establishment may offer its customers various terms to settle accounts.

Cash

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.

Credit

Customers are allowed to pay at intervals over a short- term, usually one to three months to settle outstanding balances.

Hire Purchase

Hire-purchase is a long term payment plan e.g. 24 – 36 months. Interest is charged to the customer increasing the amount owed.

Cash Discount

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

Trade Discount

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.

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