Which of the following is the reason why a seller allows a customer cash discount?

Accounts - Principles of Accounts

WAEC 2010

A. agreement to become a regular customer
B. introducing a new customer to the seller
C. settlement of account within a stated period
D. placing a larger order

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Correct Answer: Option C

Explanation

Small cash discounts benefit the seller because they increase the likelihood that a buyer will pay quickly, therefore providing the seller with cash in a shorter period of time, as it is better to receive e.g. 95% of an invoice with a few days than wait 30 or more days to receive the full amount.

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