If a firm switched from taking trade credit discounts to paying on the net due date, this might cost the firm some money, but such a policy would probably have only a negligible effect on the income statement and no effect whatever on the balance sheet.

Question

Quizplus · Accepted Answer

By switching from taking trade credit discounts to paying on the net due date, the firm would lose out on the cash discount offered by suppliers, resulting in increased cost of goods sold and lower gross profit on the income statement. This would also affect the balance sheet by reducing cash and increasing accounts payable. Therefore, the statement is false.

If a Firm Switched from Taking Trade Credit Discounts to Paying