By Yoli (Durban, South Africa q: How will the VAT input and output be treated when settlement discount is granted?
Increase in Revenue (2) expense, journal Entry, debit, credit, cost of Merchandise Sold 5,000.
Settlement discount is the same as playstation store gift a cash discount and is a discount granted for paying off a debt early.Personal Financial Planning, professional Ethics, tax, technology.Customer paid 9,000 in cash at the time of sale.These offers are a good way to identify any services you offer which your competitor doesn't.Some countries do not charge VAT but rather have a General Sales Tax (GST).The 22 is essentially 110 (100 10).For example, if a five percent sales discount didn't encourage more orders, offering free gift fragora discount code wrapping or shipping might be a more successful promotion.
Likewise, vAT output is recorded when you make income.
Because settlement discount granted is an expense, we record, vAT input.
Here's an example to show what happens when we have a settlement discount.
And your present gross margin.0.3.0.0.7.3 6 22.214.171.124.126.96.36.199 8 400.0 188.8.131.52.4.6.0 10 200.0 184.108.40.206.0.3 12 400.0 220.127.116.11.2.9 15 300.0 150.0 100.0.
Checking the effect of discounts on the gross margin.1, increase in Assets (Cash) by 9,000.Dr Discount granted 20, dr VAT input 2, cr Sale 100.Settlement discount granted is an expense.Whenever you alter the sales price (and markup) of your goods and services, it's important to understand how this will affect your profit margins and sales targets.Seasonal or periodic discounts There are times of the year, month week or day when some goods and services have less demand than other times.Description of Journal Entry, sold merchandise at 11,000 price and received 9,000 in cash.Let's say VAT is 10 and we sell an item usually worth 100 (110 with VAT included) for only.By analysing your sales cycles and highlighting these periods, you can offer discounts for customers who buy merchandise or services out-of-season.This is true for seasonal clothing, festive merchandise, travel bookings and restaurants.