10-26-10memopart2 - decrease in your accounts receivable...

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Memorandum To: CM 2 Management Team From: Leah Celani, Accountant Date: October 26, 2010 Subject: Potential Discount Incentives I understand that your company is considering offering incentives to customers that pay promptly. Your present terms are 1/10 and n/20, meaning you currently offer a 1% discount if the customer pays within ten days of the purchase or gross amount due in 20 days. By switching to 2/10, n/30, you would be offering a 2% discount if paid within ten days or gross amount due in 30 days. If you decided to instead switch to 4/15, n/45 terms, you would be offering a 4% discount if paid within 15 days of the purchase or gross amount due in 45 days. By switching to either of these terms, your balance sheet will likely show a
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Unformatted text preview: decrease in your accounts receivable account because you will be receiving a prompter payment from your customers because of the increased incentive discounts. You may decide to instead offer trade discounts, a discount offered to the purchaser by the seller. By using trade discounts, you will avoid frequent changes in catalogs, be able to alter prices for different quantities purchased, or be able to hide the true invoice price of your merchandise from competitors. These advantages may be more beneficial for your company than offering sales discounts....
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