- This topic has 3 replies, 3 voices, and was last updated 9 years ago by decent55.
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- December 12, 2014 at 11:10 pm #220411
As VAT is calculated on amount after Trade & Cash Discount whether customer avail the Cash Discount or not. Hence I have confusions regarding to two different scenarios, here it comes.
—Data—
List Price 250
Trade Discount 20%
Cash Discount 2.5%
VAT 17.5%—————-INVOICE—————
List Price————————-250
Trade Discount—————–(50)
————————————-___
————————————-200
*VAT——————————34.12
————————————-___
————————————234.12*—*VAT Calculation—
CD 200 x 2.5% = 5
Net Effect 200 – 5 = 195
VAT 195 x 17.5% = 34.12—–
Scenario 1;
If the customer does not avail the Cash Discount, would the VAT remain unchanged or we again calculate VAT on 200 (price after TD only) and alter the invoice.Scenario 2;
If the customer avail the Cash Discount, on which amount we will calculate CD, on 200 or on 234.32? (VAT is already calculated on price after TD & CD) and whats the VAT treatment in this scenario?Looking forward for your kind responses,
Regards,
December 13, 2014 at 9:16 pm #220475Basically,regardless of whether the customer takes the cash discounts not the VAT is calculated as he it were taken.This remains the relevant amount regardless of whether the buyer makes a prompt payment or not.Hope this helps.
December 15, 2014 at 10:39 pm #220674Thanks mrjonbain for your kind reply, But whats about the Scenario 2 where customer took the cash discount on which amount we will calculate CD on 200 or onn 234.32 (according to my example)?
January 27, 2015 at 6:44 pm #223996it ll b calculated on 200 in senario 2 n the vat amount 34.2 would b added up in net result tht is 195
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