Transaction

Question 1

Cash transactions

Answer 1

payment is made at the same time or immediately during a cash sales or purchase

Question 2

Credit transactions

Answer 2

payment is delayed or postponed during a credit sales or purchase

Question 3

What is trial balance used for?

Answer 3

It ensures arithmetic accuracy in recording

It facilitates the preparation of financial statements

A balanced trial balance is not absolute proof of accuracy. There may be errors not revealed by a trial balance.

Question 4

Cash discount

Answer 4

reduces the invoice price and encourages customers to pay early within a specific period / immediate or prompt payment. Recorded in the ledger account as discount allowed/discount received.

Question 5

Trade discount

Answer 5

Trade discount reduces list price and encourages customers to buy in bulk and loyalty. Not recorded in the ledger discount as only the invoiced price is recorded.