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i. A solvent person is a person whose assets are more than his liabilities. ii. Cash discount does not appear in the books of accounts.

Monjur Alahi

State whether the following statements are true or false with reason:

i. A solvent person is a person whose assets are more than his liabilities.

ii. Cash discount does not appear in the books of accounts.


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Salim Ahmed Kawsar

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i. This statement is True.

A person who is unable to pay his debts is called insolvent. An insolvent person does not have sufficient assets to pay his debts. His business debts are much larger than his business and personal assets. He cannot settle the dues of his creditors fully. Insolvency leads to the compulsory dissolution of the business.

ii. This statement is False.

It is the amount deducted from the final amount due at the time of receipt. It is the concession given for encouraging prompt payment. It is given either for the spot payment or for payment within a specific period. A cash discount is calculated after deducting a trade discount, since it is a loss to the seller and gain to the buyer, a cash discount appears in the books of accounts.

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