Cash books and receipts
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Hiya guys. Wondering if you could help me understand better:
I'm a bit vague on how discounts work on receipts/invoices. If i was checking the receipts and remittance advice notes for descrepanies, how do i account for the settlement and discounts? I know how to work them out but i'm unsure whether you have to add the settlement discount back onto the VAT if they were not allowed the discount.
Also, if the amount shown on the remittance advice note and cheque (which were both same figures) is different from the actual invoice, do i still account for them and put them through or do i send it back and ask them to fill out another chq?
Many thanks
Dave.
I'm a bit vague on how discounts work on receipts/invoices. If i was checking the receipts and remittance advice notes for descrepanies, how do i account for the settlement and discounts? I know how to work them out but i'm unsure whether you have to add the settlement discount back onto the VAT if they were not allowed the discount.
Also, if the amount shown on the remittance advice note and cheque (which were both same figures) is different from the actual invoice, do i still account for them and put them through or do i send it back and ask them to fill out another chq?
Many thanks
Dave.
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Comments
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Re:Cash books and receipts
Basically, the VAT stays the same whether the discount is taken or not. The reason VAT is calculated as if the discount was taken is to save having to mess about with the VAT when payment is recieved. Once the invoice has been sent and the various figures posted you can forget about the VAT.
For example, company X allows a 10% discount for settlement within 14 days and John Smith buys 110 pounds ( the pound sign is causing some funny characters to show up - �????�???�??�?�£) of goods on credit. So the invoice will be
110.00 goods ---> cr Sales a/c
11.00 discount
(110-11)*17.5% =17.32 VAT ---> cr VAT a/c
127.32 Total ---> dr J Smith a/c (and sales ledger control if using)
On payment, the remittance should be 116.32 if within 14 days or 127.32 otherwise.
As for a cheque than doesn't match the invoice, you should still put it through - I don't think it's good business to send money back
. If the remittance note and the cheque agree then there's no problem, there's no reason why a customer needs to pay the whole invoice at once.
If the remittance note and the cheque don't agree or the customer has taken a settlement discount erroneously, then you should inform the customer of this. You should probably also record the cheque number and amount on the remittance note to make chasing things up easier if the customer disputes the payment.
Hope this helps
Chris
[Post edited to correct some elementary mistakes, doh!]0 -
Re:Cash books and receipts
the figures you gave are misleading.
If the customer buy the goods for 110 pounds with 10% cash discount allowed, the figures for invoice will be as following:
net before cash discount: 110
cash discount: 11
net after cash discount: 99
Vat calculated after cash discount: 17.32 (remains the same after the payment has been received, even if the cash discount has not been taken)
Invoice price: 110+17.32=127.320 -
Re:Cash books and receipts
That was a deliberate mistake to see if you were concentrating 0 -
Re:Cash books and receipts
And, by the way, one more mistake...
110.00 goods ---> cr Sales a/c
17.32 VAT ---> cr VAT a/c
127.32 Total ---> dr J Smith a/c0 -
Re:Cash books and receipts
I'm feeling totally embarrassed now. I've edited my original post and I think it's right now0 -
Re:Cash books and receipts
thank you for your help guys.
I have a lot of catching up to do and this was making me struggle. I got to work on my CR and DR's at the moment and also my PLB in prep for the first exam.
Again, thanks guys and gals.0