Chapter 4: Bank Discount, Trade Discount, and Cash Discount
Learning Outcomes
At the end of this chapter, you should able to:
- Define bank discount, trade discount, and cash discount.
- Calculate bank discount, trade discount, and cash discount.
- Define the elements of negotiable instruments.
A bank discount is applied at the time that the note or loan is extended, and is automatically deducted from the loan amount that is used to calculate the schedule of payments on the loan.
A trade discount is a discount that is cut from the retail or published price of an item. It helps to increase the demand for the goods. Turning into a cash discount, it is offered to customers from the selling price aiming to encourage an early payment before the expiration of the credit period.
After completing the negotiable activities using either one of the above, a negotiable instrument is used to guarantee the payment.
