The Collection on Account Within the 1/10, N/30 Discount Period

question 99

Multiple Choice

The collection on account within the 1/10, n/30 discount period was recorded using a 10% discount rather than a 1% discount in both the controlling and subsidiary accounts. This error will cause:

• A) the net income for the period to be understated.
• B) the net income for the period to be overstated.
• C) the control account to not agree with the subsidiary ledger.
• D) the assets to be overstated.

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Definitions:

Payables Turnover Rate

An efficiency ratio that measures how quickly a company pays off its suppliers, calculated as cost of goods sold divided by average accounts payable.

Accounts Payable Balance

The total amount of short-term liabilities or obligations a company owes to its creditors or suppliers.

Sales

The total revenue generated from goods or services sold by a company during a specific period.

COGS

Stands for Cost of Goods Sold, which is the direct costs attributable to the production of the goods sold by a company.