C10: Trade Receivables (Impairment not included)

When a business grants credit to its customers, it consider both accounting and non-accounting information. Which of the following is an accounting information?

• New customers' history of repayment

• Economic outlook

• Reputation of customers

• Credit terms and cash discount

When a business grants credit to its customers, it consider both accounting and non-accounting information. Which of the following are non-accounting information? (Select 2)

• Trade receivable balance

• Economic outlook

• Existing customers' history of payment

• Reputation of new customers

What are the double entries in recording a credit sales to customers? (Select 2)

• Dr TR

  Cr Sales revenue

• Dr Cash at bank

  Cr Sales revenue

• Dr Cost of sales

  Cr Inventory

• Dr Inventory

  Cr Cost of sales

What are the double entries in recording a Sales Returns from customers?

(Select 2)

• Dr Sales revenue

  Cr TR

• Dr Sales returns

  Cr TR

• Dr Cost of sales

  Cr Inventory

• Dr Inventory

  Cr Cost of sales

What are the double entries in recording a cheque received from a trade receivable after a discount is given to trade receivable by business? (Select 3)

• Dr Trade receivable

• Cr Trade receivable

• Dr Cash at bank

• Dr Discount allowed

• Cr Discount Allowed

What are the double entries in recording a dishonoured cheque? (Select 2)

• Dr Trade receivable

• Cr Trade receivable

• Dr Cash at bank

• Cr Cash at bank

Interpret the following double entries

Dr Cash at bank 950

Dr Discount allowed 50

Cr Trade receivable 1000

• A discount of $50 was received by the business when trade receivable paid $950 to settle $1000 owing.

• A cheque of $1000 was received from TR to fully settle amount of $1000 owing

• A cheque of $950 was received from TR to fully settle the amount of $1000 owing

A trade discount is given to encourage customers to make prompt or early payment. True or false?

• True

• False

Answer explanation

A trade discount is given to encourage the customers to purchase more (bulk purchase) while a cash discount given to encourage trade receivables to make early or prompt payments on amounts owing to business.