U2, AOS 2: Lesson 6 - Discounts Flashcards
1
Q
Why do businesses offer discounts?
A
Incentivises early repayment
2
Q
Why do businesses sell on credit?
A
Increase sales volume
Increase sales value
Offer flexibility for customers
3
Q
How are discounts determined?
A
From the “terms” on the invoice.
4
Q
Does a business have to offer a discount?
A
No - it is up to the business whether they offer a discount.
5
Q
T/f - Offering discounts will assist the business with maintaining a positive cash flow.
A
True - collecting payments from AR sooner means the business has the cash to use elsewhere in the business.
6
Q
T/f - Offering a discount will impact Net Profit.
A
True - profit will be lower due to Discount Expense.
7
Q
Discounts received should be recorded as…
A
Discount revenue
8
Q
Discounts are recorded in the…
A
Statement of account.
