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Partial payment invoice example for Research and Development

welcome to excel in business math video number 40 in this video we got to talk about partial payments on an invoice with a cash discount applied that means we have a bill of a hundred and twenty-five bucks the terms are three percent discount if we pay within 10 days and if we pay 50 bucks not the whole amount fifty bucks we pay within that 10 day window we cannot take the 50 bucks subtract it from the 125 to get the remaining balance we actually have to do a special calculation when we apply 50 bucks that gets the cash discount and credit the account 5155 now this calculation is not hard because guess what we get to use what we learned from video number 38 about cash discounts and video 23 where we learned about increase and decrease problems now let's go over to the sheet partial payment and look at our first example partial payment on an invoice with cash discount applied example number 1 total invoice 125 bucks the terms are 3/10 net 40 and the invoice date is 3/8 2018 partial payment is 50 bucks and that is made on 3 17 2018 and the question is how much should the account be credited well let's enter our numbers 125 enter the terms are 3 percent discount if paid within 10 days otherwise the total amount is due within 40 days without avoiding a penalty invoice date 3/8 slash 2018 and we paid it on 3/17 2018 partial payment made before the discount date we didn't pay the whole amount we only paid 50 bucks cash discount there it is right there I'm going to enter it as a death Oh point zero three number of days to take the discount that's the ten ten now I'm going to calculate this to make sure that Excel tells me true or false so I first want to calculate days between date paid and invoice date hopefully it's less than ten so we do date math there's the invoice pay date - the invoice date remember it's always later date - earlier date and when I hit enter yes indeed we get the discount nine days it took us to pay now I'm gonna do a formula I'm gonna ask the question hey number of days it took us to pay are you less than or equal to the number of days they gave us to take the discount enter oh what's the partial payment now before we solve this with an increased decreased problem let's just think about common sense and how we could answer the question how much should the account be credited for first think about how much you would have to pay if you owe just one dollar and you were given a three percent discount you would not have to pay the whole one dollar you would have to pay one - three pennies so you would only have to pay ninety seven pennies so the idea is you owed a dollar you paid within the discount period so you only paid ninety seven pennies when you paid ninety seven pennies they wiped away your one dollar debt this means for every one dollar in the account balance you only need to pay ninety seven pennies so if someone pays fifty bucks you cannot just take the fifty bucks off the account you must take one dollar off that fifty bucks for every ninety seven cents that you paid well how in the world do we do that well we ask the question how many 97's are in 50 and of course dividing 55 ninety-seven tells us how many 97's are in 50 so this is the calculation the is how we credit the account we take fifty divided by one minus three pennies which gives us 50 divided by 97 and we get 51 55 so the partial payment and of course we have to use round we're dealing with money we're going to use this in a subsequent calculation and we have the potential of extraneous decimals I'm taking the 50 bucks and I'm going to divide it by 1 minus the discount close parentheses internally that gives us the calculation but we need to round it to the penny and enter there it is 51 55 now to get the remaining balance I say hey there's the whole hundred and 25 minus notice the business has to subtract 51 55 even though they were only given 50 bucks and enter now let's look at this from a slightly different point of view if you remember from video number 23 we have a begin amount and if it's a decrease problem which it is we're gonna start with the full credited amount and go down based on some rate of change which is minus 3% down to the end part which is our 50 now it is they begin that we don't know so I'm going to question mark that the end part we know we know we went from some bigger credit amount down to the amount we paid so I'm gonna say equals and get the 50 bucks from right over there now in a decrease problem the begin amount is always a hundred percent and the rate of change is gonna be negative now we already have our rate of change three percent or three pennies for every dollar so watch this I'm not even going to type an equal sign to do a full now I'm gonna type - and I'm going to click on the 0.03 now when I hit enter that gives me minus three percent now I want you to notice something if I click in the sound look up in the formula bar anytime you type a minus or a plus as the first character in the cell it'll automatically put the equal sign in for you that was also pre formatted now rate that's one plus the rate of change and what is rate mean that means the amount you multiply by they begin to get the end a hundred percent or one plus the rate of change and when I hit enter there's the 97 pennies for every one dollar now we want to remind ourselves what was our awesome trick anytime we have in a begin amount an Associated part and associated rate remember we have a change part that's the amount of goes down the rate of change that's the percentage change downward then we have a second part the end part and the rate that's what it means by Associated part and associated rate so since we have n part and rate those are associated with each other so when I take the hand remember how this diagram works we cover up what we're trying to solve with and there's the formula part divided by rate associated part divided by associated rate so right up here equal sign associated part divided by associated rate and when I hit enter that is another way to solve and another way to think about how to solve this problem now with that in mind of course we have a check amount anytime we calculate that 75-43 and the 5155 I'm going to check by taking partial payment and I'm going to multiply it by the rate in parenthesis one - I had to type the - here here over here we didn't because we entered it as a negative but there it is one minus that that's the complement rule we learned from video 38 close parentheses and enter and sure enough I get 50 all right let's look at our second example for partial payment on invoice with cash discount applied they gave us a two percent discount the invoice total was this but we couldn't make the whole payment so we only paid 900 bucks so when we send this in they better not just credit our account for nine hundred it better be more than five hundred remember two percent means for every one dollar in that amount we only have to pay 98 pennies so how do we do that we need to bump this 900 up to something bigger than 900 so I take equals the amount we paid divided by 1 minus the cash discount that 1 minus will give us 98 notice anytime we divide some number by a number smaller than one that's 0.98 it'll always result in a bigger number than the numerator so when I close parenthesis and enter there's the amount we get credited I'm absolutely happy to take 18 dollars and 37 cents as a cash discount now I actually forgot to round I'm going to hit f2 and after the equal sign I'm going to type round and after the calculation comma to close parentheses we do run the risk of extraneous decimals if that percentage cast discount changes we're doing money and I'm going to use it in a subsequent calculation the amount that still owed equals there's the full amount minus the amount that was credited to our account and enter so we got credited 918 37 and we still own 934 and 38 cents alright in this video we very importantly saw how to take what we learned in video 38 about cash discounts and if we make a partial payment apply the concepts from increase decrease or just straight logic right we got three percent discount so when we send in 50 bucks actually every 97 cents in that 50 bucks got us $1 taken off our bill alright if you like that video be sure to click that those up leave a comment and some because there's always lots more videos to come from excellence fun including next video in video 41 where we'll talk about mark up on cost and mark up on sale price alright we'll see you next video