The Collection of a $1200 Account After the 2 Percent

question 233

Multiple Choice

The collection of a $1200 account after the 2 percent discount period will result in a

• A) debit to Cash for $1176.
• B) credit to Accounts Receivable for $1200.
• C) credit to Cash for $1200.
• D) debit to Sales Discounts for $24.

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Definitions:

Cash Flow Ratio

A financial metric that compares a company's operating cash flow to its current liabilities, indicating its ability to pay off its obligations with the cash it generates.

Operating Activities

Activities directly related to the business's primary operations, including cash flows from sales, expenses, and cost of goods sold.

Total Assets

The total of a company's assets, encompassing both short-term and long-term assets.

Direct Method

In cash flow statement preparation, this approach lists the major categories of gross cash receipts and payments, offering more detail compared to the indirect method.