(a) Write the following commercial… | Commerce

Question 1 Report

(a) Write the following commercial abbreviations in full:

(i) C.OD (ii) C.I.F (iv) E & O.E

(b) The sale of a good costing Le100,000 attracts a trade discount of 5% and a cash discount of 5%. You are required to calculate the:

(i) trade discount value

(ii) cash discount value

(iii) net amount payable by the buyer.

Answer

Answer Details

(a) Commercial abbreviations in full

C.O.D = Cash On Delivery (payment is made when the goods are delivered).
C.I.F = Cost, Insurance and Freight (the price quoted covers the cost of the goods, insurance and freight to the buyer's port).
E & O.E = Errors and Omissions Excepted (the seller reserves the right to correct any mistakes made on the invoice).

(b) Discount calculations

Cost of goods = Le100,000. Trade discount = 5%, cash discount = 5%.

(i) Trade discount value

Trade discount is calculated on the cost price.

\[ \text{Trade discount} = \frac{5}{100} \times 100{,}000 = Le5{,}000 \]

(ii) Cash discount value

Cash discount is calculated on the amount remaining after deducting trade discount.

\[ \text{Invoice price} = 100{,}000 - 5{,}000 = Le95{,}000 \]

\[ \text{Cash discount} = \frac{5}{100} \times 95{,}000 = Le4{,}750 \]

(iii) Net amount payable by the buyer

\[ \text{Net amount} = 95{,}000 - 4{,}750 = Le90{,}250 \]

The buyer therefore pays Le90,250.