ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Buyer pay the good first and seller collects payment later
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Seller sends the good first and collects payment later
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Buyer and seller did not send goods and payment
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None of the above
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Detailed explanation-1: -An open account transaction is a sale where the goods are shipped and delivered before payment is due. Obviously, this option is the most advantageous for the importer in terms of cash flow and cost, but it is consequently the highest risk option for an exporter.
Detailed explanation-2: -The open account definition is an account which remains to be paid. Open account is also known as an account payable by the bearer. Their terms exist in a multitude of situations: trade credit which is not fully paid, a deferred payment schedule for an item, a past due account, and more.
Detailed explanation-3: -An open account transaction in international trade is a sale where the goods are shipped and delivered before payment is due, which is typically in 30, 60 or 90 days. Obviously this option is advantageous to the importer in terms of cash flow and cost, but it is a risky option for an exporter.
Detailed explanation-4: -Consignment. Consignment in international trade is a variation of open account in which payment is sent to the exporter only after the goods have been sold by the foreign distributor to the end customer.