The Net Method of Recording Purchases Refers to Recording

question 240

Multiple Choice

The net method of recording purchases refers to recording:

• A) Specified amounts and timing of payments that a buyer agrees to in return for being granted credit.
• B) Purchases at the invoice price less any cash discounts.
• C) Inventory at the lower of cost or market.
• D) Purchases at the full invoice price, without deducting any cash discounts.
• E) Inventory at its selling price.

---

Definitions:

Marketable Securities

Financial instruments that can easily be converted to cash due to their high demand and short maturity period.

Lockbox System

A service offered by banks to companies for the receipt of payment from customers, under which payments are sent directly to a location accessible by the bank.

Processing Float

The time difference between when a transaction is initiated and when the funds are available in the account, affecting the usable balance.

Commercial Paper

Commercial paper refers to short-term, unsecured promissory notes issued by companies to finance their short-term liabilities.