Skip to content

CA Intermediate · Financial Management and Strategic Management · Management of Payables (Creditors)

A supplier offers credit terms of '2/10, net 30'. Under these terms, which statement is correct?

The term 2/10, net 30 means the buyer gets a 2% cash discount if it pays within 10 days of the invoice, and otherwise must pay the full invoice amount by day 30. The discount rewards early payment.

  1. AA 2% discount is allowed if payment is made within 10 days, otherwise the full amount is due within 30 daysCorrect
  2. BA 10% discount is allowed if payment is made within 2 days, otherwise the full amount is due within 30 days
  3. CA 2% discount is allowed if payment is made after 10 days but within 30 days
  4. DA 2% interest is charged if payment is made after 10 days and the full amount is due in 30 days

Explanation

In '2/10, net 30', 2 is the percentage cash discount, 10 is the discount period in days, and 30 is the final credit period. Option C reverses the timing, since the discount is for early payment, not late. Option D treats the discount as a penalty interest.

Did you get it right without looking?

One question tells you little. A timed set on Management of Payables (Creditors) shows your real accuracy, how long you take and where you lose marks.

Practise Management of Payables (Creditors)Free diagnostic mock

More Management of Payables (Creditors) questions