|
Question on cash discount again
|
|
Wed 09 May 2012 11:49 AM
|
TinaC
Student
21 posts
|
Hi,
I'm sorry because I know I've already asked about this question, but I emailed my tutor asking if the college notes were wrong and she said the college was correct.
In my college notes, there is this example:
Goods are £500 and cash/settlement discount is 2%
Goods £500
VAT (20% of £490) £98.00
Total (if discount not taken) £598
Less cash discount(2% of £598) £11.96
Total if discount taken (£598 - £11.96) £586.04
I thought the 2% discount should be worked out on the £500 not the £598 which makes £588 if discount is taken, but the tutor obviously doesn't think so. Am I going wrong again?
Thankyou,
Tina
|
|
|
|
|
Wed 09 May 2012 12:08 PM
|
Mandy S
No Membership
32 posts
|
Hi Tina
if its a cash settlement discount you take this off the VAT - also are you definetly working on 20% vat only my tutor and training manual is still 17.5% which is confusing.
Anyhow cash discount is taken off the VAT only element
hope this helps, by the way who are you training with?
______________________
Mandy S
|
|
|
|
|
Wed 09 May 2012 12:49 PM
|
KerryB
Member CB.Dip PM.Dip
268 posts
|
Hi Tina,
It is definitely not correct! And your training provider really needs to check what they are saying.
If the goods total £500 and Vat is @ 20%, the invoice should show this;
Net £500
Vat £98 (£490 x 20% - the VAT is calculated on the discounted amount)
Total £598
Now if the customer decided to take the cash settlement discount, they need to deduct the2 % from the Net figure only, as the VAT has already been calulated on the discounted amount.
Total to pay would be;
Net £490 (£500 - 2% discount of £10)
VAT £98 (the VAT has already been calculated based on the discounted figure)
Total £588
The above is correct. The fact that your training provider is saying take 2% from the total amount of £598 is utter nonsense, the VAT element has already had the discount accounted for.
Regards
Kerry
______________________
www.berrybookkeeping.co.uk
My responses are based on my opinions, not necessarily facts.
|
|
|
|
|
Wed 09 May 2012 01:09 PM
|
TinaC
Student
21 posts
|
Hi Kerry,
Thanks so much for replying. I was just surprised when I queried the example with the tutor that she still maintained that the college was correct. I will contact Open Study College about it, as it's obviously confusing for students to read an incorrect example in the notes and even more confusing when the tutor can't see the mistake.
Thankyou for clarifying. I'm very relieved that I've found this forum, as I don't feel very confident asking the college questions any more.
Tina
|
|
|
|
|
Wed 09 May 2012 01:36 PM
|
Mandy S
No Membership
32 posts
|
seem to be conflicting info here
now im getting confused!
______________________
Mandy S
|
|
|
|
|
Thu 10 May 2012 08:46 AM
|
Lesley
Student
Accredited Training Provider
66 posts
|
Hi Tina
If you look at Kerry's figures and follow these as they are correct and the cash discount is worked out on the net amount. Vat is always worked out on the discounted amount even if the customer decides not to take advantage of it.
I would go back to your provider and query this again.
Kind regards
Lesley
______________________
Lesley Smith
Course Tutor
lesley@mycourse.co.uk
Mycourse Training
0845 862 0608
|
|
|
|
|
Thu 10 May 2012 01:05 PM
|
Rasa
Member CB.Dip PM.Dip
Practice Licence
16 posts
|
Hi All,
I just had the same question in my exam practice paper so very pleased to find this discussion!
My example is that the entries are recorded with the VAT based on the discounted amount. However the payment of invoice is in full as the company does not take advantage of discount in time.
Do we need to account for the difference in VAT on payment of such invoice?
My practive exam answers show PI of goods at net value with discounted VAT and PP of full invoice amount.
Thanks,
Rasa
______________________
RD
|
|
|
|
|
Thu 10 May 2012 01:15 PM
|
Lesley
Student
Accredited Training Provider
66 posts
|
Hi Rasa
No the vat isnt adjusted if the business does not take advantage of the discount offer.
Regards
Lesley
______________________
Lesley Smith
Course Tutor
lesley@mycourse.co.uk
Mycourse Training
0845 862 0608
|
|
|
|
|
Thu 10 May 2012 01:19 PM
|
KerryB
Member CB.Dip PM.Dip
268 posts
|
Hi Rasa,
Based on the example further down this post (2% discount on £500 @ 20% VAT), if the customer does not take the cash discount they will pay;
Net £500
VAT £98 (Discounted amount £490 x 20% VAT)
Total payable £598 (this being the full invoice amount, inclusive of the discounted VAT)
If they do take the discount;
Net £490 (Discounted amount £500 x 2%)
VAT £98 (Discounted amount £490 x 20% VAT)
Total payable £588 (this being the full invoice amount less £10 cash settlement discount)
The VAT does not revert back to 20% of £500, it stays as 20% of the discounted amount of £490.
Hope that explains it thoroughly for you :)
Best regards
Kerry
______________________
www.berrybookkeeping.co.uk
My responses are based on my opinions, not necessarily facts.
|
|
|
|
|
Thu 10 May 2012 01:20 PM
|
KerryB
Member CB.Dip PM.Dip
268 posts
|
Sorry Lesley, our posts crossed paths :)
______________________
www.berrybookkeeping.co.uk
My responses are based on my opinions, not necessarily facts.
|
|
|
|
|
Thu 10 May 2012 01:24 PM
|
Lesley
Student
Accredited Training Provider
66 posts
|
KerryBsaid:
“Sorry Lesley, our posts crossed paths :) ”
Thats ok dont worry about it as long as Rasa and the other students understand the concept then the more replies the better.
Lesley
______________________
Lesley Smith
Course Tutor
lesley@mycourse.co.uk
Mycourse Training
0845 862 0608
|
|
|
|
|
Fri 11 May 2012 03:24 PM
|
Open Study College
Accredited Training Provider
4 posts
|
Dear All,
Thank you to those who spotted this error in the course materials. We have swiftly looked into this and corrected the error.
All tutors have now been informed about the print error in question, so if you require any clarification, they will be there ready to help.
Please accept our apologies for any inconvenience caused.
With best wishes,
Open Study College
|
|