# Accountancy Mathematics: Cash Discount (Part 3 of 3)

This is the final part of Cash Discount which dealt with:

• Taking Advantage Of Cash Discount on Partial Payment of Invoices
 PARTIAL PAYMENT OF INVOICE & IMPACT ON CASH DISCOUNT Very simply, if a buyer pays part of the invoice within the discount period, he can only be entitled for proportionate fraction of the Cash discount that is offered. ILLUSTRATION 1 An invoice dated 2 January 2006 for \$6,000 was offered cash discount terms of 1/10, n/30. If the invoice was partly paid \$\$3,000 on 10 th January 2006, what was the payment after Cash discount? Solution: As the invoice was paid 8 days after the date of the invoice ie within the discount period, the buyer is entitled to the 1% cash discount BUT THIS TIME he has only partly the amount owing ie \$3,000 out of total amount of \$6,000 Cash discount simply is Discount x Amount due If he had made payment of \$5,940 (\$6,000-\$60), he would have received the total Cash discount \$60(0.01x\$6,000) As he has only partly ie \$3,000 His proportionate fraction entitlement of the Cash discount: =3,000/(6,000-60) x \$60 =\$30 Therefore, the amount still owing: =\$6,000-(\$3,000+\$15) = \$2,985 ILLUSTRATION 2 On 20th January 2006, Mr A bought some goods at \$100,000 with cash discount term 3/10,n/30. To pay the invoice on 30 th January, she borrowed the money for 20 days at 10% per annum simple interest. How much did she save by borrowing to take advantage of the discount? Solution: Cash discount = 3% x \$100,000 =\$3,000 Principal borrowed =\$100,000 -\$3,000 =\$97,000 Credit period = 30 days â€“ 10 days =20 days Simple interest calculation: Principal x interest x time (Prt) =\$100,000 x 10% x 20/360 = \$555.56 Net amount saved = Cash Discount â€“ Interest = \$3,000 -\$555.56 = \$2,444.44
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