A cash discount is provided on:Question 2Answera.Salesb.Prompt paymentc.Cash purchasesd.Purchases
Question
A cash discount is provided on:
Question 2
- a. Sales
- b. Prompt payment
- c. Cash purchases
- d. Purchases
Solution
A cash discount is provided on:
a. Sales b. Prompt payment c. Cash purchases d. Purchases
The answer is b. Prompt payment.
Here's why: A cash discount is a deduction allowed by the seller of goods or by the provider of services in order to motivate the customer to pay within a specified time. The seller or provider often refers to this discount as a sales discount, and the buyer sees it as a cash discount. Its primary purpose is to shorten accounts receivable cycles for those who provide credit terms. This is commonly used in business-to-business commercial transactions, where the payment of bills is typically delayed.
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