The various modes one may adopt to make payment for purchase of a product are:
(i) Immediate payment: In case of immediate payment, the buyer makes full payment to the seller in cash. Of course he can make payment by cheque or draft or credit card or debit card, provided the seller agrees to it. Actually a seller is not bound to accept payment by cheque unless there is an express or implied agreement to that effect.
(ii) Deferred Instalment plan: Mostly known as the ‘buy now – pay later’ plan, under this method the buyer pays a nominal amount to the seller at the time of purchase and takes possession of the goods. The balance is paid by him in instalments over a period of time. The instalment is a fixed amount payable monthly or quarterly to the seller and the total payment is equal to the unpaid amount and the interest charged on it.
(iii) Deferred payment at the end of credit period: When goods are sold on credit, payment is required to be made by the buyer at the end of the agreed period of credit (say) three months. If payment is made by him earlier, the seller allows a special discount which is indicated in the invoice as the net amount payable on prompt payment before the due date.