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Good day,
If a company has revenue of $5,000,000.00 and is proposing to offer a 1% discount and it will result in 1/4 of the debtors taking up the discount which will result in debtor days being reduced from 50 days to 30 days.
Would I need to calculate a revised revenue so as to calculate the revised receivable?.
The examiner always allows either – you could either base your receivables calculations on $5M or on $5M less the discount.
(The difference will be pretty small always anyway)
Thank you.
I was very anxious for this answer as i see where the original value of receivables was used in the answer.However in my mind the fact that in reality a discount is on Sales which means that customer will pay less, therefore amounts receivable will automatically less, unless there is additional sales volume or adjustment to selling price then sales revenue will fall.
Thanks again
However in my mind the fact that in reality a discount is on Sales which means that customer will pay less, therefore amounts receivable will automatically less, unless there is additional sales volume or adjustment to selling price then sales revenue will fall.
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