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58CTP 4th Edition - Ch 8.Differentiate.5

Terms in this set (11)

13) Differentiate among these nine common credit terms.
Cash before delivery (CBD):
Sometimes referred to as prepayment terms, this requires the buyer to make full and final payment before shipment or receipt of goods.
13) Differentiate among these nine common credit terms.
Cash on delivery (COD):
The seller ships the goods and the buyer pays upon receipt.
13) Differentiate among these nine common credit terms.
Cash terms:
The buyer generally has seven to 10 days to make payment.
13) Differentiate among these nine common credit terms.
Net terms:
The seller specifies a net due date by which the buyer must pay in full.
13) Differentiate among these nine common credit terms.
Discount terms:
In addition to specifying a net due date, the seller may offer a discount on payments made prior to that date.
13) Differentiate among these nine common credit terms.
Monthly billing:
The seller issues a monthly statement covering all invoices prior to a cutoff date, typically toward the end of the month; if the seller extends proximo (or prox, meaning in
the following month) payment terms, then the buyer must pay by a specified date during the following month.
13) Differentiate among these nine common credit terms.
Draft/bill of lading:
Also known as a documentary collection, this lets sellers collect payments through banking channels. Documentary collection is more common in international than
domestic trade. The seller ships the goods to the buyer and sends the shipping and title documents to a bank that transmits the documents to the buyer's bank. The buyer gains possession of the documents and thus ownership of the goods upon paying the bank or upon signing a draft agreeing to pay at a future date. Upon collection, the buyer's bank remits payment to the seller's bank.
13) Differentiate among these nine common credit terms.
Seasonal dating:
The seller agrees to accept payment at the end of the buyer's selling season.
This lets manufacturers provide short-term financing for a buyer's purchases and reduces the
manufacturer's inventory costs.
13) Differentiate among these nine common credit terms.
Consignment:
The supplier (sometimes referred to as the consignor) ships goods to another
party (sometimes referred to as the consignee) who has no obligation to pay until the goods
have been sold; the supplier retains title to the goods until the goods are sold. The supplier
retains title to the goods until they are sold, at which time title is transferred to the ultimate
buyer. The consignee will then deduct any commission or fees and forward the remainder to
the supplier.
14) Differentiate between the two methods a seller must consider when offering cash discounts
a way to evaluate the cost versus the benefit to be gained from receiving a payment early.

gross method
gross revenues are recorded on the income statement and in receivables, and discounts are recorded as an expense.
14) Differentiate between the two methods a seller must consider when offering cash discounts
a way to evaluate the cost versus the benefit to be gained from receiving a payment early.

Net method
net revenues are recorded on the income statement and in receivables. Any
discounts not taken are shown as income.
THIS SET IS OFTEN IN FOLDERS WITH...