Question

QUESTION 27 Explain the meaning of the credit terms 2/10, 1/30. T T I Arial no 3 (1201). T. 15 .20 Path: P QUESTION 28 Give the definition of current assets and current liabilities and provide two examples of each.

Answer 1

27)

2/10 credit term means, if the amount is paid by the debtor with 2 days, he is entitled to a discount of 2% on the amount payable. n/30 means the amount is payable by the debtor within 30 days and he is not entitled to any discount.

28)

The benefit of those assets which is less than 12 months are treated as Current assets. ie. benefit is derived from those assets within 12 months. Examples - Prepaid expense, Inventory.

Liabilities which are payable within 12 months are treated as current liabilities. Examples - Short term loan, notes payables.