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Debit & Credit for CLEAR

Cash discount...

Question

Cash discount terms offered by trade creditors should never be accepted because __________________.

A

Benefit is very small

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B

Cost is very high

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C

No sense to pay earlier

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D

None of the above

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Solution

The correct option is D None of the above
Cash discount is allowed by the firms to speed up the cash collections.

If cash discount is allowed by the creditors, business have to make a trade off between the earning from cash discount verses the cost of repaying the amount.

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