settlement discount
jeanneldn
Just JoinedRegistered Posts: 2
Hi everybody,
My exam is in 5 days and I feel unsure about the settlement discount when customer has paid within the period . EG
INVOICE with 2% settlement discount if paid within 7 days
net: 200
10% trade discount: 20
net 180
Vat 30.87 (180*2%=3.6 180-3.6*%7.5% 176.74*)
Total 210.87
and now I have two versions from two different teachers
if the customer pays within 2 days: 210.87*0.02=206.66
or 176.74+30.87 = 207.27
Please help me
Thank you in advance for your help
.
My exam is in 5 days and I feel unsure about the settlement discount when customer has paid within the period . EG
INVOICE with 2% settlement discount if paid within 7 days
net: 200
10% trade discount: 20
net 180
Vat 30.87 (180*2%=3.6 180-3.6*%7.5% 176.74*)
Total 210.87
and now I have two versions from two different teachers
if the customer pays within 2 days: 210.87*0.02=206.66
or 176.74+30.87 = 207.27
Please help me
Thank you in advance for your help
.
0
Comments
Stick with what you are doing it looks good to me.
If I work through:
Net = £200
10% Trade Discount = £20
After Discount Net = £180
VAT = £30.87
Calc: (180*0.98) * 0.175
Total = £210.87
Your answer is right.
Your teacher is correct
1st teacher told me the answer was
210.87*2%=4.22 210.87- 4.22= 206.65 ( she said That was the answer)
2nd teacher a few days later:
176.40+30.87= 207.27 ( He said he was right the other teacher was wrong)
What should I answer to have the point at the aat level 2 exam?
Thank you for all your help
Isn't this the answer if the discount IS taken:
180*0.98 = 176.4
176.4*0.175 = 30.87
176.4 + 30.87 = 207.27
?????????????????
200*0.10 = 20
180*0.02 = 3.60
200-20-3.60=176.40
176.40+ 30.87= £207.27 ???
200-20=180
180 * 2% = 3.6.
180 -3.6 = 176.40 *17.5% = 30.87
Invoice total is 180 + 30.87 =210.87
and what customer actually pays:
210.87 less discount 3.6 = 207.27 but only if he pays within 7 days.
If you want to know what goes on the bottom of the invoice the answer will be £210.87 - like Cullen said - regardless of when the customer pays and weather or not he gets the settlement discount.
if he takes the discount, he'll pay only 207.27
The reason for settlement discounts being calculated before VAT is added is because it is assumed that the customer will always take the settlement discount.
Hi
I agree with Matt and Nich - the answer is £207.27
Vat is always calculated on the discounted amount so you need to take the trade and settlement discounts off before calculating VAT and adding.