Chapter 7 Key Terms

Question	Answer
Trade Discount	Reduction off original selling price (list price) not related to early payment.
Cash Discount	Savings that result from early payment by taking advantage of discounts offered by the seller; discount is not taken on freight or taxes.
List Price	Suggested retail price paid by customers.
Trade Discount Amount	List price less net price.
Invoice	Document recording purchase and sales transactions.
Trade Discount Rate	Trade discount amount given in percent.
Net Price	List price less amount of trade discount. The net price is before any cash discount.
Freight Terms	Determine how freight will be paid. Most common freight terms are FOB shipping point and FOB destination.
FOB Shipping Point	Buyer pays cost of freight in getting goods to his location.
FOB Destination	Seller pays cost of freight in getting goods to buyer's location.
Single Trade Discount	Company gives only one trade discount.
Complement	100% less the stated percent. Example: 18% 82% is the complement (100%-18%)
Chain Discount	Two or more trade discounts that are applied to the balance remaining after the previous discount is taken. Often called a series discount.
Series Discount	Two or more trade discounts that are applied to the balance remaining after the previous discount is taken. Often called a series discount.
Net Price Equivalent Rate	When multiplied times the list price, this rate or factor produces the actual cost to the buyer. Rate is found by taking the complement of each term in the discount and multiplying them together. (Do not round off)
Single Equivalent Discount Rate	Rate or factor as a single discount that calculates the amount of the trade discount by multiplying the rate times the list price. This single equivalent discount replaces a series of chain discounts. The single equivalent rate is (1- Net price equivalent rate.)
Terms of the Sale	Criteria on invoice showing when cash discounts are available, such as rate and time period.
Credit Period	Credit days are counted from date of invoice. Has no relationship to the discount period.
Discount Period	Amount of time to take advantage of a cash discount.
Due Dates	Maturity date, or when the note will be repaid.
End of Credit Period	Last day from date of invoice when customer can take cash discount.
Ordinary Dating	Cash discount is available within the discount period. Full amount due by end of credit period if discount is missed.
Receipt of Goods (ROG)	Used in calculating the cash discount period; begins the day that the goods are received.
End of Month (EOM)	Cash discount period begins at the end of the month invoice dates. After the 25th discount period, one additional month results.

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	Created by Veronica Huninghake over 1 year ago