(a) List four means of payment in business. (b) Explain the following: (i) Quotation (ii) Hire purchase (iii) Deferred payment (iv) Quantity discount.

Answer Details

(a) Four means of payment in business

1. Cash (legal-tender notes and coins).
2. Cheque.
3. Bank draft.
4. Credit transfer / standing order / electronic transfer.

(Other acceptable means: bill of exchange, postal order, money order, documentary credit.)

(b) Explanation of the terms

(i) Quotation: A quotation is a document sent by a seller to a prospective buyer, in reply to an enquiry, stating the price at which the seller is willing to supply the goods together with terms such as trade discount, delivery time and conditions of payment. It helps the buyer to compare prices from different suppliers before placing an order.

(ii) Hire purchase: Hire purchase is a system of buying goods in which the buyer takes possession of and uses the goods after paying an initial deposit, and then pays the balance by agreed instalments over a period. Ownership of the goods passes to the buyer only after the final instalment has been paid. If the buyer defaults, the seller may repossess the goods.

(iii) Deferred payment: Deferred payment is a credit arrangement in which the buyer receives the goods and full legal ownership immediately but is allowed to pay the price later, either in a lump sum or by instalments. Unlike hire purchase, ownership passes at once, so the goods cannot be repossessed for non-payment; the seller can only sue for the debt.

(iv) Quantity discount: A quantity (or bulk) discount is a reduction in the price per unit granted by a seller to a buyer who purchases goods in large quantities. It is given to encourage bulk buying, reward regular customers and reduce the seller's handling costs.