Chapter 2 Cash Vs Credit

Akako Technologies Plc manufactures and supply electronic components for the smartphone and home computer industry. They buy £1.5m of silver and copper printed circuit boards in order to manufacture the chassis for their computer circuitry. They ordered the goods on 01/04/20x9, take receipt on 04/04/20x9 and receive an email on 05/04/20x9 containing the invoice. Payment is made by bank transfer (CHAPS) on 12/04/20x9.

Is this a Cash or Credit transaction?

Jack Smith is a sole trader buying and selling car cleaning supplies on his local market stall. He purchases the bulk of his products from AmareOne Ltd and at the end of each month he receives a statement listing all of his invoices that are outstanding. As his customers are cash payers, he decides that he will pay for his supplies this way and at the end of each month he goes to his local AmareOne Ltd and pays his outstanding balance by cash.

Is this a Cash or Credit transaction?

Amadeus Kaffeehaus is an Austrian coffee shop who caters to the general public. It buys its stock from a wholesaler by driving to its depot on a weekly basis to replenish supplies. As Amadeus Kaffeehaus is a regular customer, they have been allowed to open an account with the wholesaler and as a result they receive a 10% discount on all purchases made. This is shown on the invoice produced which is paid on the business credit card before leaving the warehouse.

Is this a Cash or Credit transaction?

Customers who go to the coffee shop pay by cash but some also use a debit card and occasionally by credit card.

Are the Debit card payments Cash or Credit transactions?

Customers who go to the coffee shop pay by cash but some also use a debit card and occasionally by credit card.

Are the Credit card payments Cash or Credit transactions?

Cash is.....

• Later Payment

• Immediate Payment

• Later or Immediate Payment

Credit is.....

• Later Payment

• Immediate Payment

• Later or Immediate Payment