Chapter 5, Problem 5.1CP

To determine

Credit terms are the terms of payment offered by the seller to the buyer.

2/10, n/30 refers to the sales discount given to the buyer by the seller in case of prompt payment. 2/10, n/30 means the following:

• “2” is the discount percentage offered to the purchaser by the seller.
• “10” refers to the number of days available for the buyer to pay and take advantage of the discount.
• “n/30” indicates that if the payment is not made by the buyer within 30 days, then he might not be eligible for the sales discount. Hence, payment will be due for the net amount at the end of the current month.

To Discuss: Whether Mr. S behaved in a professional manner by subtracting the discount even though the discount period had expired.