3 Flashcards
What is the Credit Period?
The amount of time allowed before full payment is due.
What is a Cash Discount?
A discount that encourages buyers to pay earlier.
What is a Purchases Discount?
How a buyer views a cash discount.
What is the Discount Period?
The amount of time allowed to take the cash discount.
What are Purchases Returns?
Merchandise a buyer purchases but then returns.
What are Purchases Allowances?
A price reduction granted by the seller to a buyer of defective or unacceptable merchandise.
What does FOB Shipping Point mean?
The purchaser owns the merchandise during transit.
What does FOB Destination mean?
The seller owns the merchandise during transit.
How do companies using the gross method record purchases when a discount is offered?
They record the purchase at the full invoice amount.
When is the discount recorded?
When payment is made within the discount period.
What happens when the purchaser pays within the discount period?
The discount reduces the cost of inventory.
