Concept:Trade discount terms such as “
4 net
7” offer a cash discount to encourage early payment.
Explanation:The notation “
4 net
7” means a
4% discount is granted if the buyer pays within
7 days of the invoice date.
If payment is not made within that period, the full invoice amount becomes payable.
The discount applies to the invoice price, not to the date of purchase or delivery.
This term rewards prompt settlement of the invoice by the buyer.
Therefore, the correct interpretation is that a
4% discount is allowed on the price charged if payment is made within seven days.
Answer:D.
4% discount will be allowed on the price charged if payment is made within seven days.