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CS Executive · Corporate Accounting and Financial Management · Forecasting Financial Statements

A firm expects credit sales of Rs 4,00,000 in March. Experience shows 60% is collected in the month of sale with a 2% discount, and 40% is collected in the following month. What is the cash collected from March sales during March?

Cash collected in March is 60 percent of Rs 4,00,000, which is Rs 2,40,000, less a 2 percent discount of Rs 4,800. The net cash received is Rs 2,35,200. Ignoring the discount would wrongly give Rs 2,40,000.

  1. ARs 2,35,200Correct
  2. BRs 2,40,000
  3. CRs 1,60,000
  4. DRs 3,92,000

Explanation

Collection in the month of sale = 60% x 4,00,000 = 2,40,000. The 2% discount is 4,800, so cash received = 2,35,200. Rs 2,40,000 ignores the discount.

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