Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

What is the likely advantage of extending credit to customers?

It guarantees immediate cash inflow for the business.

It can increase sales by allowing customers to purchase now and pay later.

It eliminates the risk of bad debts.

It reduces the need for accounts receivable management.

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Verified step by step guidance

Understand the concept of extending credit to customers: Extending credit means allowing customers to purchase goods or services now and pay for them later, typically within a specified period.

Analyze the potential advantages of extending credit: One key advantage is that it can increase sales by making purchases more accessible to customers who may not have immediate cash available.

Evaluate the incorrect options: Immediate cash inflow is not guaranteed when extending credit, as payment is deferred. Extending credit does not eliminate the risk of bad debts; in fact, it introduces this risk. Additionally, it does not reduce the need for accounts receivable management; it increases the need for monitoring and collection efforts.

Focus on the correct advantage: The correct advantage is that extending credit can increase sales by providing customers with the flexibility to purchase now and pay later, which can attract more buyers and boost revenue.

Summarize the reasoning: Extending credit is a strategic decision that can enhance customer satisfaction and drive sales growth, but it requires careful management to mitigate risks such as bad debts and ensure effective accounts receivable processes.