accounting

Which of the following accounts would a company debit when a cash discount is granted?

• Discount Received

• Cash

• Discount Allowed

• Sales revenue

Which of the following is not a valid reason for offering a trade discount?

• To encourage bulk purchases

• To reward loyal customers

• To increase profit margins

• To make prices more attractive to retailers

What is the effect of a cash discount on the seller’s accounting records?

• Increases revenue

• Reduces accounts receivable

• Increases expenses

• Increases liabilities

When a business grants a cash discount, which of the following accounts is typically credited?

• Accounts Receivable

• Cash

• Sales Revenue

Which of the following statements is true about a cash discount?

• It is applied on the invoice price before the trade discount

• It is a reduction on the selling price based on the payment terms

• It reduces the buyer’s cost of goods sold

• It is not relevant in modern accounting practices

Which of the following is true about the treatment of discounts in accounting?

• Discounts are shown as separate accounts in the income statement

• Discounts reduce the sales revenue

• c) Discounts increase expenses

• Discounts are treated as an asset

The purpose of offering a cash discount is to:

• Increase the selling price

• Encourage early payment

• Attract new customers

• Reduce the cost of goods sold

How is a discount recorded in the books of accounts?

• As revenue

• As an expense

• As a reduction in revenue

• As a liability

Which of the following is a characteristic of a cash discount?

• Given for purchasing in bulk

• Given for early payment

• A permanent reduction in price

• Given as a special offer

What is a trade discount?

• A discount given on the total sale price

• A discount given to promote the product

• A discount given to customers who buy in bulk

• A discount given for early payment