The Terms '2/7' Appearing on an Invoice for the Sale/purchase

question 9

Multiple Choice

The terms '2/7' appearing on an invoice for the sale/purchase of inventories means that the buyer:

• A) will receive a 2% discount if paid within 7 days of the invoice date.
• B) will receive a 7% discount if paid within 2 days of the invoice date.
• C) has 7 days from the invoice date to pay or will be charged a 2% surcharge.
• D) has 2 days from the invoice date to pay or will be charged a 7% surcharge.

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Definitions:

Inventory Costing Method

Refers to the techniques or formulas used by businesses to assign costs to their inventory and determine the cost of goods sold, such as FIFO, LIFO, or weighted average methods.

First-In First-Out (FIFO)

First-In, First-Out (FIFO) is an inventory management and valuation method where goods produced or acquired first are sold, used, or disposed of first.

Ending Inventory

The total value of all the goods a company has in stock at the end of a financial period, which have not yet been sold or used in production.

Recent Cost

The latest cost incurred for goods or services, reflecting the most up-to-date pricing information.