Skip to Main Content

Math help from the Learning Centre

This guide provides useful resources for a wide variety of math topics. It is targeted at students enrolled in a math course or any other Centennial course that requires math knowledge and skills.

Payment Terms and Cash Discounts

An invoice for the goods is sent, and the seller specifies payment terms on the invoice. This lesson includes:

  • Reading of invoice dates;
  • Calculating timeline for the end of discount and credit periods
  • Ordinary, End-on-the-month, and Receipt of Goods Dating
  • Partial Payments

The business selling the goods can offer a cash discount to encourage prompt payment

undefined

Cash Discounts

undefined

Ordinary Dating

Ordinary dating, whereby payment terms are based on the invoice date.

undefined

Example

Determine the payment needed to settle an invoice with a net amount of $750, dated January 26, terms of sale is 2/10, 1/20, and n/60, if the invoice is paid:

i.February 3;
ii.February 14;
iii.When is the end of the credit period?
 

Solution

See the video below.

End-of-the-month Dating

End-of-month dating, or E.O.M. dating. The invoice date is shifted to the last day of the month.
 
Determine the payment needed to settle an invoice with a net amount of $750, dated January 26, terms 2/10 E.O.M. paid on February 10.
undefined
undefined

Receipt-of-Goods Dating

Receipt-of-goods dating, or R.O.G. is used when the transportation of the goods takes a long time.
 
A distributor received an invoice of $3240 dated July 10, terms 3/10, n/30 R.O.G., for a shipment of goods that arrived on November 14. When is the last day for taking the cash discount and how much is to be paid if the discount is taken?
undefined
undefined

Partial Payment

When a business pays part of an invoice within the discount period, the purchaser is entitled to the cash discount on the partial payment paid.

Example

A company has received an invoice of $3720 dated June 28, terms 2/10. What payment must be made on July 8 to reduce the debt:

I. by $1000?

undefined

A payment of $980 on July 8 will reduce the debt by $1000.

II. to $1000?

undefined

A payment of $2665.60 on July 8 will reduce the debt to $1000.

Creative Commons License
Designed by Matthew Cheung. This work is licensed under a Creative Commons Attribution 4.0 International License.
chat loading...