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

A company makes a sale on terms 2/10, net 30. What does this mean?

The customer must pay 2% interest if payment is made after 10 days.

The customer can take a 2% discount if payment is made within 10 days; otherwise, the full amount is due in 30 days.

The customer must pay the full amount within 2 days or a 10% penalty applies.

The customer can pay 10% less if payment is made within 2 days.

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Verified step by step guidance

Understand the term '2/10, net 30': This is a common credit term in financial accounting. It means the customer is offered a 2% discount if payment is made within 10 days. If the payment is not made within 10 days, the full invoice amount is due within 30 days.

Clarify the discount: The '2%' refers to the percentage discount on the invoice amount. This discount is only applicable if the payment is made within the first 10 days of the credit period.

Identify the payment deadline: The 'net 30' indicates that the full payment (without any discount) is due within 30 days from the invoice date.

Compare the options: The customer has two choices: (1) Pay within 10 days and take advantage of the 2% discount, or (2) Pay the full amount within 30 days without any discount.

Reject incorrect interpretations: The statement about paying 2% interest after 10 days, a 10% penalty, or paying 10% less within 2 days are incorrect interpretations of the term '2/10, net 30'. Focus on the correct explanation provided above.