COMMISSION AND TRADE

DISCOUNT

Course Code and Title: ISD 151 Business

Mathematics
Lecturers: Prof. Abdul Samed Muntaka, Dr. John
Mensah, Dr. Francis Adomako, Dr Benjamin Agyei-
Owusu, Dr Barima Okyere Anim
 OUTLINE
 Definition of Commission
 Essence of Commission and Discount in

Business
 Types of Commission

 Commercial Discount
 Trade Discount
 Retail Discount
 Returned Merchandise and Freight Charges
COMMISSION
 DEFINITION OF COMMISSION

 A commission is an amount paid to a sales officer

or an agent for performing a service or business
transaction on behalf of an individual or
organisation.

 It is usually calculated as a proportion/percentage

of total sales or the total amount collected/earned
from the transaction.

 Commission = Sales (Amount involved) × Rate of

Commission
 DEFINITION OF COMMISSION CONT’D
 Some organisations require their sales staff to make a
certain level of sales before they earn a commission or
their basic salary. This level of sales the sales officer
must make is referred to as a Quota

 A Quota is a level of sale (or an amount) that an agent

or sales officer must meet to earn a commission or their
basic salary.

 Where a quota exist, commission is calculated on a

commission amount.
 Commission = Commission Amount × Rate of

Commission
 Commission Amount = Sales – Quota
NB: Commission amount is the amount on which commission is calculated or
paid
 WORKED EXAMPLE 1
 Aminu made a sale of GH¢4,000 last week. If his
rate of commission is 4%, how much was his
commission.

Solution:
Commission = Sales (S) × rate of
commission (R)
Commission = 4000 × 0.04
Commission = GH¢160.00
 WORKED EXAMPLE 2
 A sales officer earns a commission of 5.5% on total
sales. If in a given month the officer received an
amount of ¢755.00 as commission, what was the level
of sales? (leave answer in 2 decimal places)

Solution:
Commission (C) = Sales (S) × rate of commission (R)
¢755 = S × 0.055 (i.e. 5.5% as a decimal)
¢755/0.055 = S
¢13,727.27 = S
The level of sales for that month is ¢13,727.27

NB. Please always remember to answer the question after you find
the answer.
 WORKED EXAMPLE 3
 Issah, a licensed broker received ¢2,500 as
commission for selling a house for ¢58,750. What was
his rate of commission?

Solution:
C=S×R
C = ¢2,500 S = ¢58,750 R=?
¢2,500 = ¢58,750 × R
¢2,500/¢58,750 = R
R = 0.04255
R = 4.26% (Rate is reported in percentage)
Answer: His rate of Commission is 4.26%
 WORKED EXAMPLE 4
 A sales agent for the Shoprite mall receives a 10%
commission on sales above his quota. If his quota is
¢20,000, determine his commission in a month that he
made a sale of ¢45,800.

Solution:
Commission = Commission Amount(Ca) × Rate of
commission
Commission Amount = ¢45,800 - ¢20,00 = ¢25,800
C = ¢25,800 × 0.10
C = ¢2,580
Answer: His commission for the month is ¢2,580
 TYPES OF COMMISSION
 Generally, there are about 5 types of commissions.
They are:
1. Straight commission – a type of commission in which
the agent or salesman's earnings is based on
commission alone. It is usually ‘one’ percent.
E.G 4. Marcus earns a 5% commission on sales. What is his
earning if his sale is ¢2,000.
 In this example, Marcus’s earning is based on the 5%
commission alone.
Solution:
C=S×R
C = ¢2,000 × 0.05
C = ¢100
Precious earns a 10%
commission on sales. What is
her earning if her sale is
¢75,200?.
2. Salary plus Commission – a type of commission in
which the agent’s earnings is based on a basic or fixed
salary plus a commission.
 Often times, the agent or sales officer has to meet a

certain quota to earn the salary.

Example 5: A sales agent receives a monthly salary of
¢2,450 plus commission of 4.8% on all sales above
¢25,000. What is his total earning if his total sales for
the month is ¢63,000.
Solution:
Total earning = monthly salary + commission
But C = Ca × R and Ca = Sales – quota
Ca = ¢63,000 - ¢25,000 = ¢38,000
C = ¢38,000 × 0.048 = ¢1,824
Total earning = ¢2,450 + ¢1,824 = ¢4,274
Example:
An agent received a commission
of 7.2% on all sales above
¢15,000 aside her monthly
salary of ¢2,450.What is her
total earning if her total sales
for the month is ¢34,000?
3. Salary plus Bonus Commission – a type of
commission in which the sales agent receives a
monthly plus a commission and/or bonus for
exceeding a certain sales quota. It is usually used to
encourage sales performance of the sales staff.
Example 6: Musah is a representative of a supermarket. He
receives a monthly salary of ¢18,700 plus 5.75% commission
of all sales exceeding ¢37,000 and a bonus of ¢1000 is he
exceeds ¢80000. Last month, he had a total sales of ¢83,900.
(1) How much was his commission (ii) How much was his total
earnings?
Solution:
(i) C = Ca × R and Ca = Sales – quota
Ca = ¢83,900 – ¢37,00 = ¢46,900
C = ¢46,900 × 0.0575 = ¢2696.75
(ii) Total earning = monthly salary + commission + bonus
Monthly salary = ¢18,700 Commission = ¢2696.75
Total earning = ¢18,700 + ¢2,696.75 + ¢1000
Example:
Amissah is a sales rep for Okyere
Company Limited. He receives a
monthly salary of ¢2,700 plus
6.3% commission of all sales
exceeding ¢24,000 and a bonus
of ¢1000 if he exceeds ¢60,000.
Last month, he had a total sales
of ¢59,900.
(1)How much was his commission
(2)How much was his total
earnings?
4. Graduated Commission – a type of commission in which the
total earning of the sales agent is based on commission rates for
different levels of sales.
 It is also a type of commission used as an incentive to encourage
sales officers to increase the volume of sales or their performance.
Example 7: Mansah’s total sales for the month of September was
¢27,500. How much was her total commission if she is paid 15%
commission of the first ¢10,000, 10% on the next ¢10,000, and
5% on all other sales.
Solution:
Total Commission = Commission on different levels of sales × Rate
of commission at the different levels.
Commission of first 10,000 = sales × rate of commission of first
10,000
Commission of first 10,000 = 10,000 × 0.15 = ¢1,500
Commission of next 10,000 = 10,000 × 0.10 = ¢1,000
Commission of other sales = 7,500 × 0.05 = ¢375
Total commission = ¢1,500 + ¢1,000 + ¢375
= ¢2,875
5. Over-ride Commission – an additional commission paid to a sales
supervisor or head of department based on store sales or the sales
of the representatives who work under the supervisor.
 This is usually calculated as a percentage of the store sales after
the store quota (where it exist) and store returns are deducted.
Example 8: Yakubu, a supervisor at the KNUST mall is paid a monthly
salary of ¢1,200; a personal commission of 2.45%; and over-ride of
3.5% on total store sales above ¢65,000. If in a given month his
total personal sales is ¢43,200 and his personal quota is ¢20,000,
what is his total earning if the store sales for the month was
¢112,000.
Solution:
Total earning = Salary + personal commission + over-ride
Personal commission = (personal sales – personal quota) × personal
rate
of commission
Personal commission = (¢43,200 - ¢20,000) × 0.0245 = ¢568.4
Over-ride = (Store sales – store quota) × override rate
Over-ride = (¢112,000 - ¢65,000) × 0.035 = ¢1,645
Total earning = ¢1,200 + ¢568.4 + ¢1,645
6. Outright commission and rebates – a commission
or discount given on purchases and/or gross/net sales.
 It is a type of straight commission and is usually a fixed

percentage of total purchases and/or gross/nets sales.

Example 9: MBK supermarket gives a 4.2% rebate on all
purchases above ¢1,500. Yaw bought goods worth
¢2,230.45 from the MBK supermarket. What was his
rebate.
Solution:
Yaw qualifies for the rebate since his purchases is above
¢1,500.
Rebate = Rebate amount × rebate rate
Rebate amount = Total purchases – minimum
requirement
Rebate amount = ¢2,230.45 - ¢1,500 = ¢730.45
Rebate = ¢730.45 × 0.042
= ¢30.68
 DEALING WITH DRAWS
 A Draw is an amount made available to a sales
officer or agent as a loan against future
commission that the officer or agent would earn.

 It may or may not attract interest. Whether it

attracts interest or not depends on the organisation
making the draw available.

 The aim of a draw is to provide a cushion for

employees against financial difficulties they may
face.

 Such amounts (draws) are deducted from the total

earning of the sales officer or agent before they are
paid.
 DEALING WITH DRAWS CONT’D
 Example 10. Musah is a representative of a
supermarket. He receives a monthly salary of
¢18,700 plus 5.75% commission of all sales
exceeding ¢37,000. Last month, he had a total
sales of ¢83,900. How much was his take home
earning if he has a draw of ¢450 against his name?
Solution:
Take home earning = total earning – draws
From example 6, Musah’s total earning = ¢21,396.75
If his draw = ¢450,
then his take home earning = ¢21,396.75 - ¢450
= ¢20,946.75
 DEALING WITH RETURNS
 Returns are goods that customers take back to the
shops where they bought them either because they
don’t like the good again or because it is faulty and/or
damaged.
 Such returns are deducted from total sales before

commissions are calculated.

 Where returns exist,

Commission amount = (Sales – returns) and

Commission = Commission amount × Rate of commission

Where quotas and returns exist,

Commission amount = (Sales – quotas – returns)
NB. Commission amount is the amount on which
commission is calculated.
 DEALING WITH RETURNS
Eg: A sales agent receives a monthly salary of ¢2,450
plus commission of 4.8% on all sales above ¢25,000.
What is his total earning if his total sales for the
month is ¢63,000 with returns worth ¢5000 ?
Solution:
Total earning = monthly salary + commission
But C = Ca × R and Ca = Sales – quota - returns
Ca = ¢63,000 - ¢25,000 - ¢5000 =
¢33,000
C = ¢33,000 × 0.048 = ¢1,584
Total earning = ¢2,450 + ¢1,584 = ¢4,034
 ASSIGNMENT 1
 Sales staff of the Mistel Shopping Mall as well as the supervisors are paid salary plus
commission for all sales above GHȻ15,000.00. Sales staff earn a commission of
4.5% for sales above GHȻ15,000.00 up to GHȻ50,000.00. For sales above
GHȻ50,000.00, they are paid an additional 3% commission on the excess of sales
above GH¢50,000.00. Supervisors are paid a personal commission of 2.5% for
personal sales above GHȻ15,000.00 up to GHȻ50,000.00 and an override of 3.5%
on excess of store sales above GHȻ30,000.00. Senior supervisors are however paid
3% personal commission for personal sales above GHȻ15,000.00 up to GH
¢50,000.00 and an override of 5% on excess of store sales above GHȻ30,000.00.
Seidu is a senior supervisor and Selina is a supervisor. Issifu, Yaw, Adzo, and Adiza
are among the sales staff. At the end of October, 2014, the store had total sales of
GHȻ168,784.50 and returns of GHȻ16,780.00. An extract from the records of the
Mall showed the following.
Name of Basic Personal Personal Draws
Personnel Salary (GHȻ) Sales Returns (GHȻ)
(GHȻ) (GHȻ)
Mohammed 550.25 56,700.00 12,000.20 -
Seidu
AgyemangSelina 485.75 82,000.00 28,775.40 1,000
IssifuOpoku 300.00 42,565.00 - 300
Yaw Mensah 300.00 23,700.00 - 250
KwatzikorAdzo 300.00 48,200.00 1,230.15 -
HarunaAdiza 300.00 45,155.00 1,172.10 150
Determine:
I. Personal commission of each staff
II. Gross earnings of the supervisors
 ASSIGNMENT 2
MELCOM supermarket has branches in most of the major cities in Ghana. To encourage hardwork and
efficiency, the company pays the following commission to its agents and staff.

Basic Salary (supervisors) GH¢1200.00

Basic Salary (staff) GH¢700.00
Personal Quota for staff GH¢8,500.00
Personal commission rate 4.25% for sales up to GH¢40,000
Bonus GH¢1,200 flat for excess sales above GH¢47,500
Store Quota GH¢70,000.00
Store returns GH҃¢15,000.00
Override 2.75%
I. What is the personal commission amount for a staff of MELCOM who makes a sale of GH¢18,500?
II. How much commission will a staff make if he/she makes a sale of GH¢17,000?
III. If a staff makes a sale of GH¢24,500 and has a draw of GH¢350.00, what will be his or her net earning?
IV. What is the store commission amount if store sales for the period is GH ¢112,550.00?
V. Humaira is a supervisor, how much override does she make if the store sales in a particular period is
GH¢130,500.00
VI. How much is Humaira’s take home for the period in (31) above?
VII. Muntaka made a sale of GH¢55,500.00 and had a return of GH¢4000.00. What is his gross earning?
VIII. How much will a supervisor who makes a personal sale of GH ¢35,000 earn in all if store sales for the
same period is 136,500.00?
IX. If store returns in a period amounted to GH¢25,000.00 and total store sales was GH¢100,000.00, how
much override will the supervisor earn?
X. What is the minimum amount of personal sales a staff has to sell to earn a bonus?
TRADE DISCOUNTS
 WHAT IS A TRADE DISCOUNT?
 A trade discount is a percentage reduction in the
list price of a merchandise.
 It is often given to repeated or large volume

buyers for large quantities of an item purchased.

 Discount rates are expressed as decimals or

percentages.
 The amount determined for the item to be sold

before any discount is given is called the list

price or catalog price.
 The amount paid for the item after the discount is

called the net price.

 The amount off the list price of the merchandise as

a result of the discount is the discount amount.

 The discount amount is computed using one of two
methods namely:
 The Discount method
 The Complement method

 The discount method is used when we are interested

in knowing both the net price and the actual
amount of the discount.

 The complement method is used when we are

interested in knowing only the net price.
 THE DISCOUNT METHOD
 Under this method, the discount amount is computed
using the formula:

Discount amount = List price × discount rate

Net price = List price – discount amount
Example 1:
Compute the discount amount and net price for a
¢450 generator offered at a 15% discount rate.
Solution:
Discount amount = ¢450 ×0.15 = ¢67.5
Net price = ¢450 - ¢67.5
= ¢382.5
Example 2: MB company sells a set of stainless steel trays
at a list price of ¢120 per tray. They give a discount of
6.75% for purchases above ¢1,200. On-the-run
restaurant purchased ¢2,500 worth of trays.
I. What price did on-the-run pay per tray after the discount?
II. What was the total discount amount?

Solution: (I)
Price to pay = List price – discount amount
Discount amount = List price × discount rate
= ¢120 × 0.0675 = ¢8.1
Price to pay = ¢120 - ¢8.1
= ¢111.9
Answer: On-the-run paid ¢111.9 per tray.
 (II)
Total discount amount = Total to pay before discount –
Amount to pay after discounts
Total to pay before discount = Ȼ2,500
Amount to pay after discount = number of trays
bought × Ȼ111.9 (i.e. the price per tray after discount).
Number of trays bought = Ȼ2,500/Ȼ120 = 20.83
Since there is no .83 part of a tray, it means on-the-run restaurant
bought 21 trays but they were already given some rebate.
Therefore, amount to pay is = 21 × Ȼ111.9 = Ȼ2,349.9
Total discount amount = Ȼ2,500 - Ȼ2,349.9
= Ȼ150.1
NB. For this question, it is wrong to multiply 21 by 8.1 to determine the total
discount amount because by virtue of the fact that on-the-run was to pay
Ȼ2,500 for 21 trays, it means they had a rebate already. If we want to get exact
figures, then we have to work with the 20.83 and not 21 but then the question is:
How does a .83 tray look like?
 THE COMPLEMENT METHOD.
 The complement of a percentage figure is the
difference between that figure and 100%
 As mentioned earlier, the complement method is

used to determine only the net price.

 To calculate the net price using the complement

method,
1. Subtract the discount rate from 100% to get the
complement rate
2. Multiply the complement rate by the list price to get
the net price.
Formula:
Net price = complement rate(s) × list price
Example 3:
Compute the net price for a ¢450 generator offered
at a 15% discount rate.
Solution:
Net price = complement rate × list price
List price = ¢ 450
Complement rate = 100% - 15% = 85%
Therefore:
Net price = 0.85 × ¢ 450
= ¢ 382.5
 DEALING WITH SERIES OF
DISCOUNTS
 A series discount is a type of additional discounts
given to buyers for purchases beyond certain agreed
levels.
 It is usually given on the list price

 It is usually used as an incentive to encourage large

volume purchases.
 A buyer is given a number of discount rates based on

the level of purchases.

 For example, a customer can be given 20% discount

for purchases up to Ȼ50,000, an additional 10% for

purchases up to Ȼ80,000 and a further 5% for
purchases above Ȼ80,000.
 To determine the net price from such a transaction, we

can either use both the discount and the complement

methods
 DEALING WITH SERIES DISCOUNTS
CONT’D
 We can compute a single discount from the series of
discounts given by subtracting the product of the
discounts from 100%.
Example 5:
Mary received a series discount of 20%, 15% and 10% after
purchasing goods worth Ȼ100,000 from Poku Trading Enterprise.
What was her discount rate? How much did she pay?
Solution
First find the complement of all the discounts she was given.
100% - 20% = 80%; 100% - 15% = 85% and 100% - 10% = 90%

Next, you find the product of the complements = (.80 × .85

× .90= .612)

Then you find her discount rate = 100% - 61.2% = 38.8%

This means that she has been given a 38.8% discount of the list
price and she is expected to pay 61.2% of the list price.
Example 6: A trader received a series discount of 18%, 15% and
12% from the purchase of a merchandise whose list price is
Ȼ250. How much did this trader pay for the merchandise if she
met all the conditions necessary for the discount.
Solution:
Net price = List price – discount amount
Discount amount = discount rate × list price
Discount rate = 100% - (product of complement rates)
Product of complements = .82 × .85 × .88 = 0.61336 or
61.34%
Discount rate = 100% - 61.34% = 38.66%
Discount amount = 0.3866 × Ȼ250 = Ȼ96.65
Therefore:
Net price = Ȼ250 - Ȼ96.65 = Ȼ153.35
This means that the trader paid Ȼ153.35 for the merchandise
instead of the Ȼ250.
NB: Solve this question using the complement method also
 COMPUTING WITH CASH DISCOUNTS
FOR FULLY PAID INVOICES
 Cash discounts are reductions in the total purchase
amounts given to buyers to encourage them to pay
quickly.
 Usually, extra interest charges are instituted to

discourage late payment.

 Some businesses use both cash discounts and

interest charges while others use only cash discounts

or interest charges to manage their transactions.
 Which ever will be used, it has to be agreed upon by

both the buyer and the seller. Whatever is agreed or

stipulated is referred to as “terms of payment” or
simply “terms”
 The terms describe details of the cash payments or

penalty rates and periods.

 Usually in business, after delivering a merchandise,
the seller issues or sends a document called an
invoice requesting payment.
 The invoice lists each item, its per unit cost (including

packaging and freight) and the total cost. The invoice

also states the terms of payment.
 The amount the buyer pays is called the remittance.

 The list price of the merchandise including allowance

for returns and excluding handling charges and other

costs is the Net Purchase Amount.
 Net purchase amount =Invoice amount – merchandise
returns – freight (handling and other costs).
 Cash discount = Discount rate × net purchase amount
 Cost of merchandise = net purchase amount – cash
discount
 Remittance = cost of merchandise + freight (if any)
 Terms of payment are often expressed in the form
2/10, n/30; or 2-10, n-30; or 2/10, net 30.
 This is read as “two-ten, net thirty.”

 Such an expression means that the buyers can

receive a cash discount of 2% if he/she is able to pay

for the merchandise in full within 10 days of the
invoice date; and the buyer will pay an interest
penalty if payment is not made after 30 days of the
invoice date.
 The date by which the discount can be received is

called the Discount date.

 The period from the invoice date to the discount date

is the discount period.

 The date after which penalty is charged is called the

due date.
 The period from the invoice date to the due date is

called the payment period.

Example:
A buyer and a seller entered into the terms; 5/8, 3/12,
2/15, n/25. If the invoice date is 28th October, determine:
I. The first, second and third discount dates.
II. The discount period
III. The payment period
Solution:
I.First discount date = 28th Oct + 8 days = 5th Nov

Second discount date = 28th Oct + 12 days = 9th Nov

Third discount date = 28th Oct + 15 days = 12th Nov
II.The discount period = Invoice date to 3rd discount date

= 28th Oct – 12th Nov

III.The payment period = 28th Oct + 25 days

= 22nd Nov
 WORKED EXAMPLE
 Suhulu Enterprise sold liquid soap to the BKT motors.
The invoice amount is Ȼ710, which includes Ȼ30 in
freight charges. The invoice date is July 13, and the
terms are 2/10, n/30. BKT motors returns Ȼ250 worth of
merchandise and pays the rest of the invoice before the
discount date. Compute the cash discount and the
remittance. Determine also, the discount date and
the due date.
 Solution:

Net purchase amount = Ȼ710 – Ȼ250 – Ȼ30 = Ȼ430

Cash Discount = 0.02 × Ȼ430 = Ȼ8.6
Cost of merchandise = Ȼ430 - Ȼ8.6 = Ȼ421.4
Remittance = Ȼ421.4 + Ȼ30 = Ȼ451.4
Discount date = July 13 + 10 days = July 23
Due Date = July 13 + 30 days = August 12
 PRACTICE QUESTIONS
A. Use the following information to calculate the
discount date, due date, payment period, cash
discount, and remittance.
Terms: 1/10, n/60
Invoice date: August 21
Invoice amount: Ȼ852.43
Returned goods: Ȼ187.23
Freight: Ȼ47.20

A. Calculate the remittance for the problem in part (a),

using the discount and complement methods.
 DEALING WITH CASH DISCOUNTS FOR
PARTIALLY PAID INVOICES
 Often times, buyers want to take advantage of a
cash discount but they can only afford to pay part of
the invoice amount within the discount period.
 In such instances, the invoice is reduced by the

amount paid (remittance) plus the amount of the

discount.
 The total amount paid plus the amount of cash

discount is called the amount credited to the

buyer’s account.
 The amount credited is best computed using the

complement method.
 The amount remaining after the part payment is

called the Unpaid balance.

 To compute the unpaid balance,
1. Compute the complement of the discount rate

(i.e. 100% - discount rate)

2. Compute the amount credited by dividing the

amount
paid (remittance) by the complement rate.

3. Compute the unpaid balance by subtracting the

amount credited (step 2) from the invoice amount.
 WORKED EXAMPLE
 MMM buys building materials from Kwasi Oppong
company with an invoice price of Ȼ484 and terms of
4/10, net 40. Within the 10-day discount period, the
company sends in a check for Ȼ300. (I) How much
credit should MMM receive and what is their unpaid
balance? (II) What amount should MMM remit if
they wanted to reduce their unpaid balance by exactly
Ȼ400?
 Solution: (I)
Step 1: Complement rate = 100% - 4% = 96%
Step 2: Amount credited = Ȼ300/0.96 = Ȼ312.50
Step 3: Unpaid balance = Ȼ484 - Ȼ312.50 = Ȼ171.50
Answers: Amounted credited = Ȼ312.50
Unpaid balance = Ȼ171.50
 (II)
Cash discount = 4% × Ȼ400 = Ȼ16
Remittance = Ȼ400 - Ȼ16 = Ȼ384
MMM has to remit Ȼ384 to be able to reduce their
unpaid balance by exactly Ȼ400.

PRACTICE QUESTIONS
An invoice for Ȼ476 has terms of 1/15, net 25. How

much is the unpaid balance after a Ȼ350 remittance

is made within the discount period?

An invoice for Ȼ565 has 2/15, net/25. What size

remittance should be made in order to have a total of
Ȼ400.
DEALING WITH SALES AND PURCHASES FOR
PRINCIPALS
 Sometimes in business, producers send goods to agents
for sale in different markets or at a different location for
sale at the best possible price.
 Such a shipment is called a consignment.

 The party who sends the shipment is called the

consignor;
and the party to whom the shipment is sent (i.e. the
agent)
is called the consignee.
o Whatever amount the commission merchant gets from

the consignment is the gross proceeds. The commission

is generally a certain percent of the gross proceeds.
o All charges (transport, advertising, storage, insurance,

etc) are deducted from the gross proceeds. The resulting

amount, which is sent to the consignor, is the net
proceeds.
 Example: Alhaji Musah, owner of AKD farms has been trying to
sell a used livestock truck and a used tractor. Unsuccessful after
3 months, Alhaji consigns the items to Alex and Co. Equipment
brokers at a commission rates of 6% on the gross proceeds
from the truck and 9% on the gross proceeds from the tractor.
Alex and Co. sold the truck for Ȼ42,500 and the tractor for
Ȼ78,600. Alex and Co. pay Ȼ610 to deliver the truck and Ȼ835
to deliver the tractor. What are the net proceeds due to Alhaji
Musah from the sale of the equipment.
 Solution:
Total proceeds = net proceeds from truck + net
proceeds from tractor.
Net proceeds = Gross proceeds – total charges
Total charges = Commission + freight/handling
charges
Truck: Commission = 0.06 × Ȼ42,500 = Ȼ2,550
Freight +Ȼ610
Total charges = Ȼ3,160
 Net proceeds from truck = Ȼ42,500 - Ȼ3,160 = Ȼ39,340

Tractor: Commission = 0.09 × Ȼ78,600 = × Ȼ7,074

Freight +Ȼ835
Total charges Ȼ7,909
Net proceeds from tractor = Ȼ78,600 - Ȼ7,909 = Ȼ70,691

Total proceeds from sale of equipment = Ȼ39,340 +

Ȼ70,691
= Ȼ110,031

 Along with the net proceeds, the commission merchant

sends the consignor a form known as an account
sales.
 The account sales is a detailed statement of the amount
 AN EXAMPLE OF A ACCOUNT SALES
ALEX & Co. August 16, 2015 NO.67324
EQUIPMENT p. o. box, 51 tafo-mile 4
kumasi
BROKERS
NAME: Alhaji Musah Farms BELOW ARE ACCOUNT SALES OF Consignment No.
76
ADDRESS: P. O. Box Ao 41 RECEIVED August 1,
2015
Aboabo-Kumasi and sold for account of same

DATE CHARGES AMOUNT DATE SALES AMOUNT

Aug. 1 Freight (truck) Ȼ 610 Aug. Truck Ȼ 42,500
16 6% Commission 2,550 10
(Truck) Tractor Ȼ 78,600
Net proceeds (Truck) 39,340 Gross Ȼ 121,100
13 Proceeds
Freight (tractor) 835
9% Commission 7,074
(Tractor)
Net proceeds 70,691
(Tractor) Ȼ 121,100
Total
 ASSIGNMENT 3
 Mark Ofori, has been trying to sell a used livestock truck
and a used tractor. Unsuccessful after 4 months, Mark
consigns the items to Ussif and Co. Equipment brokers at
a commission rates of 8% on the gross proceeds from the
truck and 8.45% on the gross proceeds from the tractor.
Ussif and Co. sell the truck for Ȼ62,500 and the tractor
for Ȼ88,500. Ussif and Co. pay Ȼ510 to deliver the truck
and Ȼ732 to deliver the tractor. What are the net
proceeds due to Mark Ofori from the sale of the
equipment.