Page 33 - LESSON 2: DISCOUNTS AND COMMISSIONS

However, it is not always possible for buyers to pay in cash. Many reliable buyers pay
given some terms to pay. Thus, the seller may allow a specified lapse of time before he collects

payment.

G. ARREARAGES

One of the big problems of business is the collection of unpaid accounts. With the M2_L2
widespread use of credit, many buyers tend to overbuy. We often hear of firms reprocessing some

appliances sold on credit simply because of the inability of buyers to pay. Even banks are not spared
from this problem.

In 1979, Central Bank Governor Gregorio Licaros mentioned that the total arrearages
of the entire banking system were still running high despite corrective efforts introduced by the

monetary authorities in the last few years.

Speaking before the meeting of the Bank Administration Institute, Licaros disclosed that

out of the ₱70 billion outstanding domestic credit as of June 30, 1979, aggregate arrearages

amounted to ₱11.7 billion - an amount he described as "disheartening”.

Pointing out that loans extended to delinquent borrowers prevent the generation of

incremental income and freeze a substantial portion of the country's financial resources, Licaros
urged the bankers to exercise discretion and sound judgment in extending to undertake a study on

the causes of problem loans, both from the viewpoint of the lender and the borrower. "These
studies," he said, "should lead to suggestions for remedial measures which the banks and the

monetary authorities could adopt." 1

H. TERMS OF SALE

The most common terms of sale as practiced by many business establishments are defined
below:

C.O.D. - Cash on Delivery. Payment is given on the day the goods are
delivered.
n/15, n/30, n/45 - Net due in 15, 30, or 45 days. No cash discount is offered for prompt
payment.

1
“Loan arrearages still high," Bulletin Today, July 11, 1979, p.16.

LESSON 2: DISCOUNTS AND COMMISSIONS 11 | P a g e