The Respective Normal Balances of Purchases, Purchase Discounts, and Freight

question 26

Multiple Choice

The respective normal balances of Purchases, Purchase Discounts, and Freight In are

• A)credit, credit, debit.
• B)debit, credit, credit.
• C)debit, credit, debit.
• D)debit, debit, debit.

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Definitions:

Terms: 3/20, Net 30

Payment terms indicating a 3% discount if paid within 20 days, otherwise net amount is due within 30 days.

June 1 Dating

A term used in trade credit to indicate that the payment is due on June 1 for purchases made now.

Lockbox System

A service provided by banks to companies for the receipt of payment from customers, involving collecting and processing checks received at a special post office box.

Electronic Transfer

The digital exchange of money between accounts, which can occur within the same financial institution or across different institutions.