Question

It is 3 mark question.

Answer 1

Explanation:

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Terms of credit are the requirements need to be satisfied for any credit arrangements. It includes interest rate, collateral, documentation and mode of repayment. However the terms of credit vary depending upon the nature of lender, borrower and loan.

Answer 2

The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days a discount of 2% will be permitted.Credit terms are the payment terms mentioned on the invoice at the time of buying goods. It is an agreement between the buyer and seller about the timings and payment to be made for the goods bought on credit.It includes payment rate,documentation and mode of payment.