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You are the manager of the Accounts Receivable Department for a merchandising business. Your billing clerk sent a bill for $2 to a customer who had charged $100 in goods (including sales tax) with terms 2/10, n/30. The customer called and indicated his displeasure. He can’t understand an error like this because he paid on time. Explain to your billing clerk why Accounts Receivable is credited for $100 and not $98. How was permission given to send less than the full amount?
College Accounting (Book Only): A ...
Solutions
College Accounting (Book Only): A ...
You are the manager of the Accounts Receivable Department for a merchandising business. Your billing clerk sent a bill for $2 to a customer who had charged $100 in goods (including sales tax) with terms 2/10, n/30. The customer called and indicated his displeasure. He can’t understand an error like this because he paid on time. Explain to your billing clerk why Accounts Receivable is credited for $100 and not $98. How was permission given to send less than the full amount?
Explain the billing clerk about credit terms and permission given to send less than the full amount.
Explanation of Solution
Account receivable: The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Credit terms are the terms of payment offered by the seller to the buyer.
For example: Terms of payment is 1/10, n/30.
1/10, n/30 refers to the sales discount given to the buyer by the seller in case of prompt payment. 1/10, n/30 means the following:
- “1” is the discount percentage offered to the purchaser by the seller.
- “10” refers to the number of days available for the buyer to pay and take advantage of the discount...
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