Comments

Many candidates attempted the question but the performance was fairly good. However, some of them were wrongly transposing their responses in second part (2b) of the question.

Some of the suggested answers were:

1. A discount is a reduction in the price of goods in order to increase sales, encourage bulk purchase and prompt payment.

OR

A discount is a deduction from the face amount of an invoice made in advance of its payment.


OR


A discount is a reduction in the catalogue price of a commodity granted by a seller to a buyer.



2. 1. Reasons for granting trade discount are to:
   
   
   1. encourage large quantity purchase.
   
   
   2. provide for buyers’ profit margin.
   
   
   3. avoid obsolescence of goods in stock.
   
   
   4. improve seller’s reputation.
   
   
   5. improve seller’s turnover.
   
   
   6. attract more customers.
   
   
   7. lower operational cost.
   
   
   8. differentiate prices.
   
   
   9. avoid tying down of business capital.
   
   
   10. maintain customer’s loyalty.
       
   2. Reasons for granting cash discount are to:
   
   
   1. avoid the risk of bad debt
   
   
   2. encourage prompt payment
   
   
   3. avoid tying down of capital
   
   
   4. increase cash inflow
   
   
   5. reward prompt payment
   
   
   6. attract more customers
   
   
   7. increase seller’s net profit
   
   
   8. lower operational cost.