View Full Version : How would you calculate multiple discounts in the following
angelamcc2007
Jun 20, 2007, 08:04 AM
A business has a bank balance at the start of the month of £2,500. It then paid for materials invoiced at £1000 less trade discount of 20% and cash discount of 10%. A cheque was received froma debtor for £200 subject to cash discount of 5%
The bank balance at the end of the month is:
A£1970
B£1980
C£1990
D£2000
I am confused as to how to treat the cash discount of 10%. Do I add to the trade discount and create 30% =£700 to deduct from £1000 or deduct 20% first then 10% = £720
Many thanks
tam_83
Jun 20, 2007, 08:52 AM
A business has a bank balance at the start of the month of £2,500. It then paid for materials invoiced at £1000 less trade discount of 20% and cash discount of 10%. A cheque was received froma debtor for £200 subject to cash discount of 5%
The bank balance at the end of the month is:
A£1970
B£1980
C£1990
D£2000
I am confused as to how to treat the cash discount of 10%. Do i add to the trade discount and create 30% =£700 to deduct from £1000 or deduct 20% first then 10% = £720
Many thanks
Not too sure but I think each transacation has to be treated separately for the books sake..
2500.00
-1000
Less 20% trade disc -833.33
Less 10% Cash disc -757.57
Total: 1742.43
Plus 200.00
Less 5 % bus disc: 190.47
Total all in all: 1932.9
But I defo could and probably am WRONG!!
CaptainForest
Jun 20, 2007, 01:57 PM
Starting Cash 2,500
1,000 Less the 20% takes you down to 800. It being a trade discount, I think the cash discount would be on the 800 and not 1,000, but am not 100% sure. It if is on the 800, that is 80 off so that takes you down to 720
Summary:
Starting Cash 2,500
Less: 720
We received 200 from a client. Based on how it is worded, he took the 5% off and 200 was what you received.
Summary:
Starting Cash 2,500
Less: 720
Add: 200
Ending Balance: 1,980
tam_83
Jun 21, 2007, 04:06 AM
Don't know what the hell way my mind was working yesterday but it certainly was convoluted!! (after looking at the answer I posted yesterday and am getting really confused!! )
angelamcc2007
Jun 21, 2007, 05:20 AM
thanks so much to both of you. I had to submit this yesterday and I think I've got it wrong.How I calculated it in the end was
starting balance 2,500
1000 - 20% = 800
800-10% = 720
200 - 5% = 190
2500 - 720+190 = 1970
Probably wrong but there you go. I think the wording as you suggest of the cheque received means that the discount has already been deducted but I didn't catch that and I've already submitted. I'll let you know when I get results but MANY MANY THANKS!!
CaptainForest
Jun 21, 2007, 10:56 AM
You're welcome