Question

Sales discounts: A)Refer to merchandise that customers return to the seller after the sale. B)Refer to reductions in the selling price of merchandise sold to customers. C)Represent cash discounts. D)Represent trade discounts. E)Are not recorded under the perpetual inventory system until the end of each accounting period.

Answer 1

Answer:

C) Represent Cash Discounts

Explanation:

Cash discount refers to a reduction in the price with the objective being prompt payment. A cash discount when offered by a seller is termed as a sales discount.

For example, so as to initiate prompt payment from the buyers, sellers may offer a discount such as 2% if the payment is made within 10 days when the ordinary extended credit period is 30 days.

Such a discount is usually offered by the seller when he/she is low on cash and there is immediate requirement of cash.

A sales discount leads to reduction of gross sales as it is deducted from gross sales to reveal net sales made by a firm during a period.