Which of the following is the reason why a seller allows a customer cash discount?

Assessment: WAEC SSCE - Financial Accounting - 2010 (Objective) Subject: Financial Accounting

Question 1 Report

Which of the following is the reason why a seller allows a customer cash discount?

Answer Details
A cash discount is an incentive offered by a seller to a customer for paying an invoice or bill within a stated period. The reason why a seller allows a customer cash discount is to encourage prompt payment of the invoice or bill. By offering a cash discount, the seller reduces the amount owed by the customer, which in turn reduces the risk of non-payment. This can improve the seller's cash flow and reduce the need for costly debt collection efforts. Therefore, the correct option is: settlement of account within a stated period.
Read lesson note on Nature And Significance Of Accounting (JAMB)
Read lesson note on Principles Of Double Entry (JAMB)
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