Sales Returns Day Book & Cash/Settlement Discount Question?

Brownie3

Morning, Can you help please?

I have a Sale of £1000, there is a 5% Cash/Settlement discount + Vat, so the Invoice is sent for £1190.

So we have...

Cr Sales £1000
Cr Vat £190
Dr Trade Receivables £1190 (Entry also in Subsid Ledger for the Individual).

Now the Debtor decides to Return £200 worth of the Goods, as a Sales Return.

Do I factor in the Cash/Settlement Discount in the Cr Invoice?

So is the Cr Invoice for £240, i.e. £200 + Vat, £240

Or is it for £200 + Vat, £238 (Which incorporates the 5% cash/settlement discount).

Cheers in advance.

coojee

Brownie3 wrote: »

Morning, Can you help please?

I have a Sale of £1000, there is a 5% Cash/Settlement discount + Vat, so the Invoice is sent for £1190.

So we have...

Cr Sales £1000
Cr Vat £190
Dr Trade Receivables £1190 (Entry also in Subsid Ledger for the Individual).

Now the Debtor decides to Return £200 worth of the Goods, as a Sales Return.

Do I factor in the Cash/Settlement Discount in the Cr Invoice?

So is the Cr Invoice for £240, i.e. £200 + Vat, £240

Or is it for £200 + Vat, £238 (Which incorporates the 5% cash/settlement discount).

Cheers in advance.

If there was a settlement discount on the original invoice then you must take it into account when calculating VAT on the credit note. If you don't the VAT won't tie up. Think about the situation if they had returned all the goods, the VAT on the credit note would have to be the same as the VAT on the invoice, if it isn't then there'd be a balance on the VAT liability account