Definitions [18]
Trade discount is allowed by one trader to another. It is given on the catalogue price, list price or market price of the goods.
A person who buys/sells goods on behalf of another person is called an agent.
Present Worth is the amount payable today, which is equivalent to a larger amount due in the future at a given rate of interest.
Sum Due is the total amount payable at a future date. It includes the present worth plus the interest for the given period.
Cash discount is a reduction in the invoice price allowed by the seller to the buyer for making immediate or prompt payment. It is calculated on the amount remaining after deducting the trade discount from the list (catalogue) price.
The amount deducted by the bank from the face value of the bill at a given rate of interest for the period from the date of discounting to the legal due date is called Banker’s Discount.
True Discount is the interest on the present worth at a given rate of interest for a given period.
Principal refers to an individual party or parties participating in a transaction.
or
The person who appoints the agent.
The charges paid to an agent for doing the work on behalf of the principal are called commission.
A broker is an agent who brings together the buyer and the seller for the purpose of purchase or sale. This commission is called brokerage and is charged to both parties.
A person who draws the bill is called the Drawer. A person on whom the bill is drawn is called the Drawee.
The date on which the bill is drawn is called the Date of Bill.
Nominal Due Date:
The date on which the period of the bill expires is called the Nominal Due Date.
Legal Due Date:
The date obtained after adding 3 days of grace to the nominal due date is called the Legal Due Date.
When the drawer wants money before the legal due date, the bank deducts some amount from the face value and pays the remaining amount to the drawer. This process is called Discounting of a Bill.
An auctioneer is an agent who sells goods by auction. He sells goods to the highest bidder.
Many a time name of the principal is not disclosed in the transaction.
A del credere agent gives a guarantee to his principal that the party to whom he/she sells the goods will pay the sale price of the goods.
The amount paid to the holder of the bill after deducting banker’s discount is called the Cash Value of the bill.
The difference between the banker’s discount and the true discount is called Banker’s Gain. It is equal to the interest on the true discount.
Formulae [11]
Selling Price / Net Selling Price = Invoice price – Cash discount
Loss = Cost price – Net selling price
Profit = Net selling price – Cost price
\[\mathbf{B.D.}=\frac{S.D.\times n\times r}{100}\]
OR
\[\mathbf{B.G.}=\frac{T.D.\times n\times r}{100}\]
C.V. = S.D.− B.D.
\[\mathbf{T.D.}=\frac{P.W.\times n\times r}{100}\]
Present Worth + True Discount = Sum Due
i.e.,
P.W. + T.D. = S.D.
\[\textbf{Commission}=\frac{\mathrm{Rate}}{100}\times\mathrm{Sales}\]
Seller’s Amount = Sales − Commission
Invoice price = List price (Catalogue price) – Trade discount.
Important Questions [6]
- Deepak’s salary was increased from ₹ 4,000 to ₹ 5,000. The sales being the same, due to reduction in the rate of commission from 3% to 2%, his income remained unchanged. Find his sales.
- An agent who gives a guarantee to his principal that the party will pay the sale price of goods is called ______.
- The payment date after adding 3 days of grace period is known as ______.
- Broker is an agent who gives a guarantee to seller that the buyer will pay the sale price of goods.
- An agent places insurance for ₹ 4,00,000 on life of a person. The premium is to be paid annually at the rate of ₹ 35 per thousand per annum. Find the agent’s commission at 15% on the premium.
- An agent was paid ₹ 88,000 as a commission on the sales of computers at the rate of 12.5 %. If the price of each computer was ₹ 32,000, how many computers did he sell?
