Asked by Abigail Dupont on Jul 01, 2024
Verified
Which one of the following will increase the average balance in accounts receivable?
A) A decrease in the discount period.
B) Cash sales as an increased percentage of total sales.
C) A decrease in the firm's cheque processing time.
D) An increase in the sales amount per customer.
E) A decrease in the trade discount.
Discount Period
The time frame during which a seller offers a buyer a reduction from the normal cost of a good or service, often to incentivize prompt payment.
Cash Sales
Cash sales refer to transactions where payment is made in full with cash at the time of the sale, without any credit.
Cheque Processing Time
The period it takes from when a cheque is issued until the funds are available in the payee’s account, reflecting bank processing durations.
- Understand the impact of credit policy changes on accounts receivable and sales volume.
Verified Answer
GB
Garry Bumboola7 days ago
Final Answer :
D
Explanation :
An increase in the sales amount per customer will increase the average balance in accounts receivable because it means customers are being billed for larger amounts, potentially taking longer to pay off their balances, thus increasing the average amount of money owed to the company at any given time.
Learning Objectives
- Understand the impact of credit policy changes on accounts receivable and sales volume.