what does term of 2/10, n/45 mean in accounting

Answer 1

The term "2/10, n/45" is commonly used in accounting and finance to describe payment terms offered by a seller to a buyer in a sales transaction. Here's a breakdown of what it means:

• 2/10: This indicates a 2% discount is available if the invoice is paid within 10 days of the invoice date. This encourages early payment.

• n/45: The "n" stands for "net," meaning the full invoice amount is due. The "45" indicates that the net amount is payable within 45 days from the invoice date, with no discount available after the 10-day period.

In summary, "2/10, n/45" means that the buyer can take a 2% discount if they pay within 10 days, otherwise the full invoice amount is due within 45 days. This kind of structure is intended to encourage prompt payment and manage cash flow effectively.

Answer 2

Journalize Purchase of $ 21000 worth of computers on​ account, term of 2/10, n/45 from Biltmore Computers.

Answer 3

To journalize the purchase of $21,000 worth of computers on account with terms of 2/10, n/45 from Biltmore Computers, you would make the following journal entry:

Journal Entry:

Date: [Date of Purchase]
Account Title | Debit | Credit
---------------------------|------------------|----------------
Computers | $21,000 |
Accounts Payable | | $21,000

Explanation:

1. Computers (or Equipment, depending on your chart of accounts): This account is debited to reflect the increase in assets due to the purchase of the computers.
2. Accounts Payable: This account is credited to recognize the liability created by purchasing computers on account.

Notes:

• You may add a brief description of the transaction underneath, such as "Purchased computers on account from Biltmore Computers, terms 2/10, n/45."
• Make sure to enter the actual date of the transaction in the journal entry.
• This entry does not reflect the discount at this stage since it is only applicable if payment is made within the discount period. If payment is made within that period and the discount is taken, you will need to make another journal entry at that time to record the payment and discount taken.

Answer 4

Journalize: Return of $ 2000 of the computers to Biltmore Computers.

Answer 5

To journalize the return of $2,000 worth of computers to Biltmore Computers, you would make the following journal entry to record the return of the items, which decreases your inventory and reduces your accounts payable:

Journal Entry:

Date: [Date of Return]
Account Title | Debit | Credit
-------------------------|------------------|----------------
Accounts Payable | $2,000 |
Computers (or Equipment) | | $2,000

Explanation:

1. Accounts Payable: This account is debited to reduce the liability, reflecting that you now owe $2,000 less to Biltmore Computers due to the return.
2. Computers (or Equipment): This account is credited to reflect the decrease in assets from returning the computers.

Notes:

• Be sure to enter the actual date of the return in the journal entry.
• You may add a brief description of the transaction underneath, such as "Returned $2,000 worth of computers to Biltmore Computers."
• This entry effectively reduces both your inventory and your liability by the same amount.

Answer 6

Journalize Payment made on account to Biltmore Computers using the questions from above.

Answer 7

To journalize the payment made on account to Biltmore Computers, you will take into account the balance remaining after the return of $2,000 worth of computers and the terms of 2/10, n/45.

Initial Purchase Amount:

• Original Purchase: $21,000
• Return: $2,000
• Remaining Accounts Payable: $21,000 - $2,000 = $19,000

Assuming you are making the payment within the discount period (10 days), you can calculate the discount:

• Discount: 2% of $19,000 = $380
• Payment Amount: $19,000 - $380 = $18,620

Journal Entry for Payment:

Date: [Date of Payment]
Account Title | Debit | Credit
-------------------------|------------------|----------------
Accounts Payable | $19,000 |
Cash | | $18,620
Purchase Discounts | | $380

Explanation:

1. Accounts Payable: This account is debited by $19,000 to reduce the liability, as you are paying off your remaining obligation to Biltmore Computers.
2. Cash: This account is credited by $18,620 to reflect the cash outflow from the payment.
3. Purchase Discounts: This account is credited by $380 to recognize the discount taken for early payment.

Notes:

• Be sure to enter the actual date of the payment in the journal entry.
• You may add a brief description of the transaction underneath, such as "Payment made to Biltmore Computers for computers purchased, taking discount for early payment."
• If the payment is made after the discount period, you would simply debit Accounts Payable for the full $19,000 and credit Cash for that amount.