Electronic Filing and Calculating

1. Electronic Filing and Calculating

2. Task 14:Invoices

3. Terminology • Purchase order is a written request for a purchase. • Vendor is the company from whom the merchandise is purchased. • Sales invoice is the seller’s bill. • Purchase invoice is a document showing the merchandise purchased and the cost. • Extension is the total amount due for each item. • Audited is the calculations verifying accuracy of charges.

4. Sales Invoices • When a vender receives an order requesting merchandise, a sales invoice is prepared. • The invoice includes: purchase order number; date merchandise ordered; shipment, freight, and payment terms; quantity and description; and costs. • The sales invoice is submitted to accounting department to have bill put on company account.

5. Practice Sales Invoices • Clear calculator (CE). • Set Decimal Selector on 2 and rounding on 5/4. Use Grand Total feature. • Calculate the extension or amount due for each item. • Quantity (24) [x] unit price ($1.96) Did you get $47.04? • Record $47.04 on invoice and answer sheet. • Calculate extension for all items and obtain the grand total. • Do problems 2 and 3 on own. • For No. 3, convert fraction into decimal

6. Freight Costs • Freight costs may be paid by seller or by buyer. • FOB means Free On Board. • Term FOB Shipping Point means the buyer pays the freight costs. • Term FOB Destination means the seller pays the freight costs. The cost of freight is listed on sales invoice and is included in amount due from buyer. • Determine who pays freight costs in problems 4 and 5.

7. Purchase Invoices • Buyer verifies that merchandise received is merchandise ordered by comparing original purchase order with purchase invoice. • Correct merchandise was sent. • Correct quantities were sent. • Merchandise not damaged. • Submitted to buyer’s accounting department for payment. • Accounts payable staff audit for accuracy.

8. Practice Purchase Invoices • Recalculate all extensions and grand total. • Place checkmark on answer sheet if correct. • If incorrect, draw line through wrong amount and write correct amount on answer sheet. • Approve invoice for payment. • If no errors, write approved followed by your initials. • If errors on invoice, write your initials beside each corrected amount on invoice. • Complete problem 6 in class. • Complete 7 and 8 on own.

9. Task 16: Discounts

10. Trade Discounts • List price is suggested retail (selling) price. • Trade discount is the amount deducted from list price given to wholesalers and retailers. • Net amount is the list price less the trade discount that is price paid by retailers and wholesalers. • Trade discounts enable businesses to modify prices for different categories of buyers. • Large purchases receive a discount. • Price changes between catalogs adjusts prices to buyers.

11. Trade Discount Formula Percentage Formula Base (list price) times Rate (trade discount percent) equals Percentage (trade discount amount) B x R = P

12. Single Trade Discounts • A single trade discount is a single percentage, such as 20%, off the list price. • Clear calculator (CE). • Set Decimal selector on 2 and rounding on 5/4 • Enter list price (1,258.00) and strike [x] key. • Enter discount rate (20) and strike [%] key. • Tap the [-] key to get net amount ($1,006.40). • Complete problems 2 through 4 in class. • Complete 5 through 10 on own.

13. Complements • It is possible to calculate net amount without calculating discount amount. • Use the complement or difference between 100% and the discount rate. If discount is 20%, multiply list price by 80%. • Clear calculator (CE) • Set decimal selector on 2 and rounding on 5/4. • List price (10,205.50) [x] • Percent Complement (100 +22 - =) or 78 [%] • Did you get $7,960.29? • Complete problems 12 through 14 in class. • Complete 14-20 on own. B x R = P

14. Series Trade Discounts • Retailers often offer a series of trade discounts off the list price. • Discounts are not added together, but linked together in a series. The discounts are computed in a succession. • Use complements of discounts in decimal form. (20% or .8)

15. Practice Series Trade Discounts • Clear calculator (CE). • Set decimal selector on floating (round final answer to two decimal places). • Enter list price (1,258.00) and strike [x] key. • Enter complement of first discount rate (.9) and strike [x] key. • Enter complement of second discount rate (.9) and strike [x] key. • Enter complement of third discount rate (.95) and strike [=] key. Round. Did you get $968.03? • Complete problems 22 and 23 in class. • Complete problems 24 and 25 on own.

16. Practice Net Amount and Trade Discount • The memory feature will allow you to calculate discount amount in addition to net amount. • Enter list price (3,256.00) and strike [M+] key. • Strike [x] key • Enter compliment rate (.9) and strike [x] key. • Enter compliment rate (.9) and strike [=] key. Did you get $2,637.36 for the net amount? • Strike [M-] key. Strike [*M] key. Did you get $618.64 for the trade discount? • Complete problems 27 and 28 in class • Complete 29 and 30 on own.

17. Single Discount Equivalents The complements of a series of discounts are multiplied together to obtain a single discount equivalent (a percent equal to two or more series discount percents).

18. Practice Single Discount Equivalents • Clear calculator (CE). • Set decimal selector on F • Multiply complements of discount rates to calculate single discount equivalent (.9 x .95 x .9). Did you get .7695? • Multiply list price by single discount equivalent. • Use constant feature (K). • Use single discount equivalent from problem 31 to calculate net amount. • Mentally round amount to 2 decimal places. • Complete 32 through 35 in class.

19. Discount Equivalent Table • A table listing single discount equivalents may be used rather than calculating the equivalents. • The rates in column headings across top of table represent first discount in series (p. 99). • The rates at left of table represent remaining discounts in series. • Discount rate: 10, 10, 10 • Look at column 10 and look at row 10, 10 • Did you get .729? • Problem: 6,264.00 [x] .729 = $4,566.46 • Complete problems 37 through 40 in class.

20. Cash Discounts • A cash discount may be deducted from invoice total if prompt or early payment is made. • Invoice will state payment terms (condition under which cash discount is offered). • Terms identify time period in which discount can be deducted and final due date of full invoice amount.

21. Payment Terms • 2/10, n/30. A 2% discount if invoice paid within 10 days of date of invoice. If invoice not paid within 10 days, full amount due within 30 days of invoice date. • 3/10, 2/15, n/30. A 3% discount if invoice paid within 10 days of date of invoice. A 2% discount if invoice paid within 15 days of date of invoice. Full amount due within 30 days of invoice date. • n/30. No discount offered. Full amount due within 30 days. (continue next slide) If seller offers both trade and cash discounts, trade discount is always deducted first.

22. 5/10, EOM. A 5% discount if invoice paid within 10 days after end of current month. Full amount due at end of following month. 3/15, ROG. A 3% discount if invoice paid within 15 days after receipt of goods, regardless of invoice date.

23. Practice Due Dates • Add number of days in terms to date of invoice to determine discount due date (last day a cash discount can be deducted) and the final due date (day full amount must be paid). • For invoice dated Jan. 12 & terms 1/10, n/30 • Discount due date. • Add date of invoice (12) and length of term (10). • Answer is Jan. 22 to get 2% discount. Continue next slide

24. Final Due Date • Subtract invoice date (12) from number of days in month of January (31) to determine days left in January. Answer: 19. • Subtract days left in January (19) from length of net term (30) to determine number of days into February. Answer: 11. • Full amount of invoice is due February 11. • Complete problems 41-45. (Click on date/time in Control Panel to figure out days.)

25. Cash Discounts Cash discounts are calculated using percentage formula (B x R = P).

26. Practice Cash Discounts • Clear calculator (CE). • Set decimal selector on 2. • Enter invoice total ($1,203.00) and strike [x] key. • Enter discount rate (2) and strike [%] key. • Did you get $24.06? • Tap [-] key to get net amount. • Did you get $1,178.94? • Complete problems 47 and 48 in class. • Complete 49 and 50 on own.

27. Task 17: Interest

28. Terms • Line of credit is an amount approved in advance by lender which borrower can access at any time. • Interest is the cost of borrowing money. • Principal is the amount borrowed. • Time refers to the length of time of the loan. • Maturity date is the date the principal must be paid. • Maturity value is principal plus interest amount.

29. Simple Interest • Interest is calculated based on principal when the simple interest method is used. • Formula: P x R x T = I (principal times rate times time equals interest) • Principal is base • Rate is percent • Interest is percentage • Time is length of loan

30. Time • Interest rates are based on time length of one year, so time must be expressed on the basis of a year. Days and months are expressed in fraction form as part of a year. • Two methods for expressing time in days: • Banker’s method is based on 360 days in year. • Exact method is based on 365 days in year. The exact method is used in this text.

31. Calculating Length of Loan • Terms of a loan state principal, interest rate, date loan was made, and due date of maturity value. • Length of loan has to be determined in order to calculate interest amount and maturity value. • The beginning day of loan is not counted, but the ending day of loan is counted.

32. Expressing Time • 2-year loan: Time is expressed in years. • P ($750) [x] R (7) [%] [x] T (2) [=] I ($105.00) • 5-month loan: Time is expressed as part of number of months in a year. • P ($750) [x] R (7) [%] [x] T (5) [÷] 12 = I ($21.88) • 90-day loan: Time is expressed as part of number of days in a year. • P ($750) [x] R (7) [%] [x] T (90) [÷] 365 [=] I ($12.95)

33. Practice Calculating Length of Loan • The problem: A loan agreement on May 29 has a due date of August 27. • What is the length of the loan? • Subtract 29 from 31 (# of days in May) = 2 • Add the days from May 29 to August 27 • May = 2 days • June = 30 days • July = 31 days • August = 27 days • Complete problems 1 through 3 in class. • Complete 4 through 10 on own. Length of loan is 90 days.

34. Practice Calculating Simple Interestand Maturity Value • Clear calculator (CE). • Set decimal selector on 6 & round to 4 or 6. • After keying in principal, strike [M+]. • Use one continuous operation: • P [6,500.] [M+] • [x] R [9.5] [%] [x] T [232] [÷] [365] [=] I • Did you get $392.49? • Strike [M+] and then [*M]. Answer: $6,892.49 Remember maturity value is the date principal must be paid.

35. Calculate Interest and Maturity Value Complete problems 12 through 14 in class. Complete 15 through 20 on own.

36. Unknown Elements • When a company is shopping for credit, one of the four elements may be unknown. • The missing element can be easily calculated by converting the basic formula. • Interest = Principal x Rate x Time

37. Calculating the Principal • Convert the simple interest formula as follows: • Principal = Interest amount ÷/over Rate x Time • Clear calculator (CE). • Set decimal selector on 4 and rounding on 5/4. • Calculate the denominator by multiplying the days by rate and dividing by days in yr. • 76 [x] 8.25 [%] [÷] 365 [=]. Did you get .0172? • Divide interest amount by denominator to get principal. • 267.14 [÷] .0172 [=]. Did you get $15,531.50? • Complete problems 22 through 24 in class.

38. Calculating the Rate • Convert the simple interest formula • Rate = Interest amount/ Principal x Time • Clear calculator (CE). • Set decimal selector on 4 and rounding on 5/4. • Calculate denominator by multiplying principal by the days (time) and dividing days in a year. • 7,814. [x] 274 [÷] 365 [=]. Did you get $5,865.85? • Divide interest amount by denominator to get the rate. • 460.40 [÷] 5,865.85 [=]. Mentally round to two decimal places. Did you get .0785 or 7.85%? • Complete 32 through 34 in class.

39. Calculating the Time • Convert to simple interest formula. • Time = Interest amount / (Principal x Rate) x 365 • Clear calculator (CE). • Set decimal selector on 4 and rounding on 5/4. • Calculate denominator by multiplying principal by rate. • 32,152. [x] 8.55 [%]. Did you get $2,749.00? • Divide interest amount by denominator and multiply by days of year to get time. (Mentally round to whole number.) • 287.05 [÷] 2,749. [x] 365 [=]. Did you get 38 days? • Complete 42 through 44 in class. • Complete 45-50 on own.

40. When a company has a poor credit history or does not have an established credit history, they are considered to be a poor risk and it is rated at a high risk level. The lender retains the interest amount at time the loan is made, and the company receives the amount borrowed minus the interest or discount amount. Discounting Do not do this section.

41. Compound Interest Companies generally use compound interest to calculate interest earned on investments.

42. Compound Interest • Interest earned on the principal is added to principal amount before additional interest is calculated. • Compound means principal and interest are added together to become the new amount for calculating interest. • When interest is compounded, investment earns more interest than if simple interest is calculated for the same time period.

43. Compounding Lump Sum Deposits When the total amount to be placed in an investment account is deposited at the beginning of the life of the account.

44. Compounding Lump Sum Deposits • Problem: $4,500 is deposited in an investment account at beginning of year. Account earns 8% interest per year. What amount of interest will be earned at end of three years? • First year: $4,500 (P) x 8% (R) x 1 (yr.) = 360.00 $4,500.00 [+] 360.00 [=] $4,860.00 • Second year: $4,860 ( new P) x 8% x 1 = 388.80 $4,860.00 [+] $388.80 [=] $5,248.80 • Third year: $5,248.80 (new P) x 8% x 1 = 419.90 $5,248.80 [+] $ 419.90 [=] $5,668.70 • Interest earned--$ 5,668.70 [-] $4,500.00 [=] $1,168.70 Use [+] key after calculating interest to take advantage of add-on feature.

45. Compound vs. Simple Interest • Simple interest method: • $4,500.00 (P) x 8% (R) x 3 (T) = $1,080.00 ( I ) • Compare: • Interest earned by compound method = $1,168.70 • Interest earned by simple method = $1,080.00 • Interest increase due to compounding = $ 88.70 • Complete problem 72 in class. • Complete 73-80 on own.

46. Compounding Periodic Deposits Deposits made at specified time periods, such as quarterly or yearly, are referred to as annuity due deposits. Do not do problems 81 through 87.

47. Task 18: Pricing

48. Terms • Profit is the net income. • Operating expenses include utilities, supplies, and payroll. • Markupamount is the amount added to the cost of the merchandise or service and is a percentage based on selling price or cost of the merchandise or service.

49. Markup • The selling price of goods and services determines how much profit a company will make. • Price charged to customers must cover both cost of merchandise or service to company and operating expenses. • Retailers generally use selling price as base for markup while manufacturers use cost as the base.

50. Markup Based on Cost • Cost is 100% or the base. Formula used: • Markup Amount (percentage): MU = C x R • Markup % (Rate): R = MU ÷ C • Cost (Base): C = MU ÷ R • Clear calculator (CE) • Use add-on feature • Set decimal selector on 2 and rounding on 5/4. • Multiply cost by markup percent to get markup amt. $15.34 [x] 33 [%] Did you get $5.06? • Add cost and markup amount to get selling price. [+] Did you get $20.40?