WAEC - Accounts Principles Of Accounts (2010 - No. 3)
Which of the following is the reason why a seller allows a customer cash discount?
agreement to become a regular customer
introducing a new customer to the seller
settlement of account within a stated period
placing a larger order
Explanation
Small cash discounts benefit the seller because they increase the likelihood that a buyer will pay quickly, therefore providing the seller with cash in a shorter period of time, as it is better to receive e.g. 95% of an invoice with a few days than wait 30 or more days to receive the full amount.
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