PRACTICE ON CONCEPTS OF CASH DISCOUNTS

Request edit access

JavaScript isn't enabled in your browser, so this file can't be opened. Enable and reload.

Sales and purchase discounts in merchandising are incentives used by businesses to encourage prompt payment and improve cash flow, such as "2/10, n/30," which means a 2% discount is available if payment is made within 10 days. These discounts help sellers accelerate collections and reduce the risk of bad debts while allowing buyers to lower the cost of their purchases, making it mutually beneficial for both parties.

(Optional) Last name, First name

(Optional) Name of School

What is the primary purpose of offering a sales discount to customers?

1 point

To increase the selling price of products

To encourage early payment of invoices

To reduce inventory levels

To avoid granting credit to customers

Clear selection

What is a purchase discount in merchandising?

1 point

A reduction in the selling price offered to all customers

A discount given to buyers for purchasing in bulk

A reduction in the amount payable by a buyer for early payment

A rebate provided after the transaction is complete

Clear selection

Which of the following best describes the term "2/10, n/30"?

1 point

A 2% discount is available for payments made within 10 days; otherwise, the net amount is due in 30 days.

A 10% discount is available for payments made within 2 days; otherwise, the net amount is due in 30 days.

A 30% discount is offered for payments within 2 days.

The invoice must be paid within 10 days with a 2% penalty for late payments.

Clear selection

What account is typically credited when a sales discount is offered and taken by a customer?

1 point

Accounts Receivable

Sales

Sales Discount

Cash

Clear selection

What is the effect of purchase discounts on a company's financial statements?

1 point

They increase total liabilities.

They reduce the cost of goods purchased.

They increase gross sales revenue.

They decrease retained earnings.

Clear selection

Under which of the following accounts is a purchase discount recorded?

1 point

Purchase Returns and Allowances

Sales Discount

Accounts Payable

Purchase Discounts

Clear selection

What type of discount is offered to customers who buy in large quantities?

1 point

Trade discount

Cash discount

Seasonal discount

Promotional discount

Clear selection

How does taking advantage of purchase discounts benefit a business?

1 point

It increases the total value of inventory.

It allows for longer credit terms.

It reduces the overall cost of goods purchased.

It increases the business’s liabilities.

Clear selection

If a seller offers terms of "3/15, n/45," what does "n/45" indicate?

1 point

The invoice is due within 15 days.

The buyer must pay within 45 days, regardless of discounts.

A penalty applies if payment is not made within 45 days.

A 3% discount is offered if paid after 45 days.

Clear selection

In merchandising, what happens when a customer takes advantage of a sales discount?

1 point

Sales Revenue increases.

Sales Discount is debited.

Inventory is credited.

Accounts Receivable increases.

Clear selection

Clear form

Never submit passwords through Google Forms.

This content is neither created nor endorsed by Google. - Terms of Service - Privacy Policy

Does this form look suspicious? Report

Forms