If the vendor allows a discount when the invoice is paid within a specified number of days, this is known as:

Question

BlackTom AI · Accepted Answer

To understand this question, start by identifying what a discount for paying an invoice within a specified period is generally called in accounting terms.
Option 1: The terms of sale. This is the set of conditions under which a sale is made, including payment terms such as discounts for early payment, due dates, and other obligations. The early payment discount is typically described within the terms of sale, so this option correctly aligns with the concept described in the question.
Option 2: An accrued expense. Accrued expenses are liabilities representing costs that have been incurred but not yet paid, such as wages earned by employees but not yet paid. This term does not describe a discount structure tied to payment timing.
Option 3: The subtotal. The subtotal is the sum of item amounts before taxes, discounts, and other charges. It is a mathematical intermediate total and does not refer to any payment discount arrangement.
Option 4: The cost of goods sold. COGS represents the direct costs attributable to the production of goods sold by a company, including materials and labor. It is a cost item on the income statement, not a description of payment terms or discounts.
In practical accounting and business practice, early payment discounts are described as part of the vendor’s payment terms, which are encompassed by the term "terms of sale." Therefore, the statement that the described arrangement is known as the terms of sale is the most accurate interpretation among the given options.

BBK99E1 - Basic Bookkeeping Level 1 Part 2 - Online Exam

If the vendor allows a discount when the invoice is paid within a specified number of days, this is known as:

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