The retailer considers VISA and MasterCard sales as
a. cash sales.
b. promissory sales.
c. credit sales.
d. contingent sales.
The correct answer and explanation is :
The correct answer is c. credit sales.
Explanation:
Retailers consider sales made through VISA and MasterCard transactions as credit sales because the transaction involves a deferred payment process. Here’s why:
- Credit Sales Defined:
In a credit sale, the seller provides goods or services to the customer with the understanding that payment will be made at a later time. Essentially, the seller allows the buyer to pay on credit rather than requiring immediate payment. This creates an accounts receivable for the seller. In this context, the retailer is selling goods or services on credit, even though the retailer will receive the payment shortly after the transaction. - VISA and MasterCard Transactions:
When a customer uses a VISA or MasterCard for a purchase, they are not immediately paying in cash. Instead, they are using a line of credit offered by the credit card issuer. The cardholder borrows money from the issuer to complete the transaction, with the obligation to repay the credit card company later, typically on a monthly basis. - Role of the Retailer:
From the retailer’s perspective, even though the customer is using a credit card, the sale is processed like a regular credit sale because the retailer will eventually receive the funds from the credit card company, typically within a few days. The retailer does not receive cash immediately but rather a promise of payment from the card issuer. - Why Other Options are Incorrect:
- a. Cash Sales: This involves immediate payment, typically in the form of cash, rather than through a credit mechanism like credit cards.
- b. Promissory Sales: This refers to sales where a promise to pay is involved, but it doesn’t capture the essence of using credit cards in a payment system.
- d. Contingent Sales: These are sales where the transaction depends on a certain condition being fulfilled, not on the use of credit cards.
In summary, since VISA and MasterCard purchases involve using credit, they are categorized as credit sales, where the retailer extends a form of credit, expecting payment later through the credit card company.