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The MCQs below are drawn from the Accountancy & Auditing subject category.
Showing 3701–3710
of 4621 MCQs
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3701
What is the specific term for a person or entity that acquires goods or services on credit?
A debtor is an individual or entity that owes money to a business for goods or services purchased on credit. Because the payment is deferred, the business records this as an account receivable. The debtor is obligated to pay the amount due at a future date, making them a significant component of a company's current assets and credit management process.
3702
What is the specific term for a price reduction granted to a buyer due to the receipt of defective or damaged goods?
An allowance is a specific reduction in the selling price granted by a seller to a buyer, typically because the goods are defective, damaged, or do not meet the agreed specifications. Unlike discounts, which are usually incentives for early payment or bulk purchases, an allowance is a compensatory adjustment made after the sale to maintain the business relationship.
3703
In the credit term '2/10-n/30', what does the notation imply regarding the discount and payment period?
The term '2/10, n/30' is a standard credit notation. The '2' represents a 2% cash discount, the '10' indicates the discount is available if payment is made within 10 days, and 'n/30' means the net (full) amount is due within 30 days if the discount is not taken.
3704
What is the term for a reduction granted on the list price of goods or services?
A discount is a deduction from the gross price of goods or services. It can be categorized as a trade discount, which is a reduction in list price, or a cash discount, which is an incentive for early payment.
3705
A business sells goods with a list price of $5,000 to a credit customer, offering a 5% trade discount and a 2% cash discount for early payment. What is the correct amount to credit to the Sales account?
Trade discounts are deducted from the list price before recording the sale. $5,000 less 5% ($250) equals $4,750. Cash discounts are only recorded if the customer pays within the specified period; therefore, the initial sale is recorded at the net trade price of $4,750.
3706
Under what condition is a cash discount typically granted to a debtor?
A cash discount is an incentive offered by a seller to a buyer to encourage the prompt payment of an invoice. By paying within a specified early period, the debtor receives a reduction in the total amount owed, which helps the seller improve their cash flow and reduce the risk of bad debts.
3707
What is the standard accounting term for a discount granted to encourage the prompt settlement of an outstanding debt?
A cash discount, also known as a settlement discount, is an incentive offered by a seller to a buyer to encourage early payment of an invoice. This is distinct from a trade discount, which is a reduction in the list price of goods, usually granted for bulk purchases or to specific classes of customers.
3708
What is the interpretation of the credit term '2/10, n/30' in accounting?
The term '2/10, n/30' means that a 2% cash discount is allowed if the invoice is paid within 10 days of the invoice date. If the discount is not taken, the net amount (n) is due within 30 days. The provided answer 'A' appears to be a shorthand representation of the 2% discount and 10-day period, though the notation is unconventional.
3709
Under what condition is a cash discount typically granted to a customer?
A cash discount is a reduction in the invoice amount offered by a seller to a buyer as an incentive for making payment within a specified, shortened timeframe. This practice encourages faster cash inflows and reduces the risk of bad debts for the business.
3710
Under what circumstances is a cash discount typically granted?
A cash discount is an incentive offered by a seller to a buyer to encourage the early payment of an invoice. By paying within a specified timeframe, the buyer receives a reduction in the total amount due, which helps the seller improve their cash flow and reduces the risk of bad debts.
