Explain about cash discount, Accounting Basics

Assignment Help:

Q. Explain about cash discount?

In a few industries credit terms include a cash discount of 1 percent to 3 percent to induce untimely payment of an amount due. A cash discount is a deduction from the invoice price that is able to be taken only if the invoice is paid within a specified time. A cash discount varies from a trade discount in that a cash discount is a deduction from the gross selling price for the prompt payment of an invoice. In contrast a trade discount is a inference from the list price to determine the gross selling price or invoice price. Sellers call a cash discount a sales discount as well as buyers calls it a purchase discount. Companies habitually state cash discount terms as follows

- 2/10, n/30-denotes a buyer who pays within 10 days following the invoice date may deduct a discount of 2 percent of the invoice price. If payment isn't made within the discount period, the entire invoice price is due 30 days from the invoice date.

- 2/EOM, n/60-denotes a buyer who pays by the end of the month of purchase may deduct a 2 percent discount from the invoice price. If payment isn't made within the discount period the entire invoice price is due 60 days from the invoice date.

- 2/10/EOM, n/60-denotes a buyer who pays by the 10th of the month following the month of purchase may deduct a 2 percent discount from the invoice price. If payment isn't made within the discount period the entire invoice price is due 60 days from the invoice date.

Sellers can't record the sales discount prior to they receive the payment since they don't know when the buyer will pay the invoice. A cash discount occupied by the buyer reduces the cash that the seller actually collects from the sale of the goods thus the seller must indicate this fact in its accounting records. The following entries illustrate how to record a sale and a subsequent sales discount.


Related Discussions:- Explain about cash discount

Explain the term- reversing entries and interim statements, Explain the ter...

Explain the term- Reversing entries and Interim statements Reversing entries - Made the first day of new accounting period. They are exact opposite of the adjusting entries

At the end of the current year, At the end of the current year, $19,900 of ...

At the end of the current year, $19,900 of fees have been earned but not billed to clients. a. What is the adjustment to record the accrued fees? Indicate each account affect

The percentage analysis of changes of corresponding items, The percentage a...

The percentage analysis of changes of corresponding items in comparative financial statements is referred to as horizontal analysis. A. True B. Fals

Julie whiteweiler made $930 this week, Julie Whiteweiler made $930 this wee...

Julie Whiteweiler made $930 this week. Only social security (fully taxable) and federal income taxes attach to her pay. Whiteweiler contributes $100 each week to her company's 40

Merchandise inventories, Carrying amounts of merchandise materials as well ...

Carrying amounts of merchandise materials as well as supplies inventories are generally determined on a moving average cost basis and are stated at the lower of cost or market.

Deferred payments, Ask question Discuss the export financing under the defe...

Ask question Discuss the export financing under the deferred payment system.#Minimum 100 words accepted#

Explain about accounting period, Q. Explain about Accounting period? As...

Q. Explain about Accounting period? As those interested in the activities of business need timely information companies must prepare financial statements periodically. To organ

Uses of accounting, uses of accounting as a software enginner

uses of accounting as a software enginner

The immediate and long-term effects of the two event, Your client, Hope, of...

Your client, Hope, of Hope's Country Corner, is curious about two events will influence both taxable and financial income. The first event involves the purchase of pottery-making e

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd