Which of the following is correct when a company uses the net price method of recording receivables? a. The company records the total invoice price in both the "Accounts Receivable" and "Sales" accounts at the time of sale as if no cash discount is involved b. Sales discount taken is deducted from sales on the income statement to determine net sales c. Cash discount is reflected in the accounting records only when the discount is taken d. Cash discount is reflected in the accounting records only when the discount is not taken e. none of the above
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
1. Which of the following is correct when a company uses the net price method of recording receivables?
a. The company records the total invoice price in both the "Accounts Receivable" and "Sales" accounts at the time of sale as if no cash discount is involved
b. Sales discount taken is deducted from sales on the income statement to determine net sales
c. Cash discount is reflected in the accounting records only when the discount is taken
d. Cash discount is reflected in the accounting records only when the discount is not taken
e. none of the above
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