Cash discount is provided on _______________?
Correct answer: B. Prompt payment
- A. Purchases
- B. Prompt payment
- C. Sales
- D. Sales return
Explanation
A cash discount is offered to encourage prompt payment within a specified period, such as “2/10, net 30.” It may arise on either purchases or sales, but its defining purpose is prompt payment.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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