Assumptions are inherent in the Economic Order Quantity (EOQ) model Economic order quantity (EOQ) is the order quantity of inventory that minimizes the total cost of inventory management. It is a measurement used in the…

The concept behind the Economic Order Quantity (EOQ) model Economic order quantity (EOQ) model is the method that provides the company with an order quantity. This order quantity figure is where the record holding costs…

Holding Inventory is the Inventory helps the organization to prevent fluctuations in demand & supply from affecting sales or production. The main objective of holding inventories is to reduce the cost associated with investment in…

Commercial draft refers to the instrument issued by the drawer to entrust the payer to pay a certain amount of money to the payee or the bearer on a selected day. The seller draws up…

Credit Policy Variable A company’s policy on when its customers should pay for goods or services they have ordered a government’s policy at a particular time on how easy or difficult it should be for…

Inventory Management is the management of inventory and stock. The overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell…

Open account An open account transaction is a sale where the goods are shipped and delivered before payment is due. Which means that the only formal evidence of credit is an invoice which accompanies the…

Credit standard means some principles that increase the selling of product and services in debt. Credit standard of a firm may be aggressive or flexible, if the credit standard is to be aggressive than the…

Trade Acceptance is a contractual agreement on a time draft or sight draft to pay the amount due at a particular date. The amounts to a promissory note that the seller can hold for future…

Seasonal Dating Under seasonal dating, the company considers an effective invoice date (rather than sales date) from when discounting period continue. This Term is used to persuade customers to buy early by not requiring payment…

Conditional Sales Contract A conditional sale contract grants ownership of a piece of property to the buyer, but not lawful possession until the sale price is paid in full. Under which the seller retains legal…

Sight Draft A sight draft is a bill of exchange that is due and payable on demand. When delivery of the shipping documents acceptance of the draft by the buyer, the bank actually withdraws money…