Question

The credit terms 2/10, n/30 are interpreted as: Multiple Choice 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 30% discount if paid within 2 days. 2% discount if paid within 30 days. 30% discount if paid within 10 days. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.

Answer 1

Answer:

The credit terms 2/10, n/30 are interpreted as:

• 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.

Explanation:

I will explain using an example:

On January 2, the company sells $1,000 worth of goods with credit terms 2/10, n/30.

January 2

Dr Accounts receivable 1,000

    Cr Sales revenue

If the client pays within the discount period:

January 11

Dr Cash 980

Dr Sales discounts 20

    Cr Accounts receivable 1,000

If the client pays after the discount period but before 30 days:

January 31

Dr Cash 1,000

    Cr Accounts receivable 1,000