SETTLEMENT DISCOUNT

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:24AM in AAT student discussion
Hiya, I have just been doing a mock simulation on UNIT 1 and want to clarify something as it doesn't tell me in my text book. If a supplier invoices a customer and that customer gets settlement dicount e.g.(3%) and then the supplier issues a credit note becasue something is faulty. On the credit note do we calculate the settlement discount of 3% on this and then work on the vat on the discounted net figure. I thought settlement discount was only calculated on invoices and not on the credit notes, as its urging the customer to settle up quickly. I checked my answer with some notes and it did calculate the settlement dicount on the credit note issued. Please help me, as I am confused.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SETTLEMENT DISCOUNT

    Hi

    If the original invoice had settlement discount calculated on it - the credit note has to reflect this to - so yes you would have to calculate the settlement discount.

    The reason its done is because it was honored on the original invoice in the first place and so it has to be honored on the credit note. The VAT reflects this too - it is lowered even if the company does not pay by the settlement discount date - so the credit note VAT needs to be lowered too.

    Hope this helps - someone may explain it better than me!!

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SETTLEMENT DISCOUNT

    thank-you, I understand it a lot better now. Much appreciated.

    Zoe

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