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

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which type of discount is applied only if the buyer pays the invoice within a certain number of days?

Trade discount

Quantity discount

Seasonal discount

Cash discount

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Verified step by step guidance

Understand the concept of a cash discount: A cash discount is a reduction in the invoice price offered by the seller to the buyer as an incentive for early payment within a specified period.

Compare the cash discount with other types of discounts: Trade discounts are reductions in price based on the buyer's status or volume of purchase, quantity discounts are reductions for purchasing in bulk, and seasonal discounts are reductions tied to specific times of the year.

Recognize the key feature of a cash discount: It is conditional upon the buyer paying the invoice within the agreed-upon time frame, typically stated in the payment terms (e.g., '2/10, net 30' means a 2% discount if paid within 10 days).

Identify the purpose of a cash discount: It encourages prompt payment, improving the seller's cash flow and reducing the risk of bad debts.

Apply this understanding to the problem: The correct answer is 'Cash discount' because it specifically relates to early payment within a certain number of days, unlike the other types of discounts listed.