(a) List four means of payment in business.
(b) Explain the following: (i) Quotation (ii) Hire purchase (iii) Deferred payment (iv) Quantity discount.
Explanation
Means Of Payment:
- (i) Money order
- (ii) Cash (bank notes and coins.)
- (iii) Cheques
- (iv) Bank drafts
- (v) Postal order
- (vi) Bills of exchange
- (vii) Stamps
- (viii) Credit transfer.
- (ix) Credit card
- (x) Vouchers (Luncheon, fuel, etc.)
(b) Explanation of terms used in business:
(i) Quotation: A quotation is a statement of the current price of a product or service. It is an answer to an inquiry. It contains the terms of payment and delivery.
(ii) Hire Purchase: Hire purchase is a term of sale whereby the seller allows the buyer to take possession of goods on hire by paying a token sum at start. The balance is usually paid over an agreed number of installments. In hire purchase system of trading, the goods do not belong to the buyer until the last installment is paid. The hire purchase price is higher than the cash price of the goods.
(iii) Deferred Payments: This is a credit system whereby the seller of goods allows the buyer to have possession of goods on the payment of an initial deposit. The seller transfers ownership of the goods to the buyers immediately. The buyer is under a duty to pay the balance owing on the goods at a later date. The seller cannot repossess the goods if the buyer defaults in making payment as agreed. In such a case the seller must sue for his balance. Deferred payment is applicable to credit sale.
(iv) Quantity discount: Quantity discount is a reduction in catalogue price of goods sold. It is used to encourage customers to buy in large quantities. It increases the seller's turnover. It allows the buyer to make profit.