See sales discounts.
See sales discounts.
What is a cash discount? Definition of Cash Discount A cash discount is a deduction allowed by some sellers of goods or by some providers of services to motivate customers to pay within an earlier specified time. The...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
See discounted cash flow model.
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
. The early payment discount is also referred to as a purchase discount or cash discount. If the company pays the supplier’s invoice within 10 days, there are two ways to record the early payment discount of $280:...
In accounting this is the rate used to discount future cash flows in order to determine their present value.
The rate that will discount all cash flows to a net present value of zero.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
discount This reduction to a distributor’s published price will vary according to the customer’s volume of purchases. trade discount This reduction to a distributor’s published price will vary according to the...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
This term is used to indicate a company or person that supplies goods and/or services to an organization. Mark as wrong Mark as right cash discount (or) early payment discount (or) purchase discount This discount...
of the following models for evaluating capital expenditures does NOT consider the time value of money (does not discount the future cash flows)? Accounting Rate Of Return Right! The accounting return uses accounting...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
be reported as the current liability Accrued Expenses Payable or Accrued Liabilities. Early Payment Discount An early payment discount is also known as a purchase discount or cash discount. This is sometimes offered by...
is considered to be risky, the rate used to discount its cash flows should be __________ the rate used to discount the cash flows of a project considered to be more safe. Select... higher than lower than the same as 14....
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
through the discounting of the future cash amounts A project or investment that results in a net present value of $0 means that the project is expected to earn exactly the specified rate used to discount the future cash...
of the increased investment. This technique also ignores the time value of money. Internal rate of return considers both the time value of money and cash flows occurring throughout the entire life of the project. The...
significantly more than the 10% rate to discount the cash flows. (A net present value of $0 would indicate that the corporation was earning exactly 10%.) Internal Rate of Return The internal rate of return (IRR) is a...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
by the inventory turnover ratio DSI = 360 divided by 4.2 (see question #10) Days' sales in inventory = 85.7 days 12. When a company offers an early payment discount of 1/10, net 30, the cash discount is...
. Mark as wrong Mark as right vendor This is another term for supplier. vendor This is another term for supplier. Mark as wrong Mark as right early payment discount (or) cash discount This is another term used for the 1%...
. When calculating the present value of a bond, which rate is used to discount the future cash flows? Select... Contractual Face Market 24. When market interest rates increase, the market value of an already issued bond...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
A contra liability account that reports the amount of unamortized discount associated with bonds that are outstanding. The discount on bonds payable originates when bonds are issued for less than the bond’s face or...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
A contra liability account arising when the proceeds of a note payable is less than the face amount of the note. The debit balance in this account will be amortized to interest expense over the life of the note.
A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000,...
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
See discount on bonds payable.
Often a 1% or 2% discount that a buyer may deduct from the amount owed to a supplier (if stated on the supplier’s invoice) for paying in 10 days instead of the customary 30 days. The purchase discount is also...
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