Question

On May 7, Juanita Construction provides services on account _________.

A) without expecting payment
B) with cash upfront
C) with deferred payment terms
D) with a discount for early payment

Answer 1

Juanita Construction provides services on account with deferred payment terms, meaning the company will invoice the client who will pay at a later agreed-upon date. This common business practice is used when immediate payment isn't feasible for the client and affects accounts receivable.

Step-by-step explanation:

When Juanita Construction provides services on account on May 7, the correct option from the given choices is C) with deferred payment terms. This means that services are provided with the understanding that payment will be made at a later date. Typically, this involves invoicing the client, who will pay according to the payment terms agreed upon, which may be 30, 60, or 90 days after the invoice date, or as determined by the contract or industry standards.

Offering services on account is a common practice in business where trust and creditworthiness of clients are considered. This approach helps facilitate larger contracts or continuous service provisions where immediate payment is not feasible for the client. It is also an essential concept in understanding how accounts receivable work, as these represent future cash inflows for a company providing services or goods on credit.