What Are Cash Taxes?

Cash discounts are a price reduction method that encourages buyers to pay their bills quickly, and their terms change over the net period. For example, 2/10, net 30 (2/10, net 30) means: If paying within 10 days, the buyer can get a 2% discount on the face value of the invoice. Otherwise, pay the full amount of the invoice within 30 days. And, it is often noted or understood that interest charges will increase after a 30-day credit period. ^[1]

Cash Discount

Cash discount is

Since cash discounts directly affect a company's cash flow, they must be reflected in accounting. There are three ways to calculate cash discounts:

Cash discount accounting statement expression:

In terms of accounting statements, many

Example of accounting for cash discounts:

In current accounting practice,

The difference between accounting for cash discounts and business discounts:

In the sales business of an enterprise, sales discounts are often encountered. In the current system, the accounting treatment of cash discounts is relatively clear, but the accounting treatment of commercial discounts is not so clear. In order to allow the majority of accountants to have a systematic understanding, the author made a more comprehensive analysis of the accounting and tax regulations for discounts, hoping to be able to learn from others.

Commercial discounts (also known as "discount sales" in tax law) refer to discounting the quotation in the price list to customers when they actually sell goods or provide services. This discount is called a commercial discount. Commercial discounts are usually listed in the form of percentages such as 5% and 10%. Buyers only need to pay a percentage of the indicated price.

The current accounting system has no clear provisions on commercial discounts. According to the existing accounting subjects and referring to the previous "Enterprise Accounting System", a reasonable accounting treatment method can be derived, which is to account for the amount after deducting the discount.

The current tax law (Guo Shui Fa [1993] No. 154 of the "Regulations on Certain Specific Issues on Value-added Tax" Article (2)) The tax payment regulations for commercial discounts are: Taxpayers sell goods in a discounted manner if the sales and discount amounts are the same If stated separately on the invoice, VAT may be levied on the sales after the discount; if the discount is invoiced separately, no matter how it is handled financially, the discount cannot be deducted from the sales.

For example, the price of a company's quotation for a product is 100 yuan. For promotion, A company gives a 10% commercial discount to large customers, the actual sales amount is 90 yuan, and the VAT rate is 17%.

If the invoice amount is directly 90 yuan (or two lines, one line writes the selling price of 100 yuan, and the other line writes a discount of 10 yuan), then the accounting is:

Borrowing: accounts receivable, etc. 105.3

Loan: Main business income 90

Tax payable-VAT payable (output tax) 15.3

If the invoice is 100 yuan and a discounted invoice of 10 yuan is issued, then the accounting will be:

Borrowing: accounts receivable, etc. 105.3

Operating expenses 1.7

Loan: Main business income 90

Taxes payable-VAT payable (output tax) 17

In addition, State Administration of Taxation [1997] No. 472 State Administration of Taxation's Reply on How to Deal with the Issue of Enterprise Sales Discounts in the Calculation of Income Tax stipulates that: Sales discounts for taxpayers selling goods to purchasers shall Income tax may be levied on the same sales invoice as indicated on the same sales invoice. If the discount is invoiced, the discount cannot be deducted from the sales. Therefore, when commercial discount sales are adopted, the determination of taxable income is also closely related to the issuance of invoices.

It should be noted that no matter how the seller's invoice is issued and how the seller is accounted, the buyer is accounted for based on the net amount that is actually payable.

Borrow: inventory, etc. 90

Tax payable-VAT payable (input tax) 15.3

Loans: accounts payable, etc. 105.3

Cash discount refers to the seller to encourage the purchaser to pay as soon as possible within the prescribed period, and the agreement promises a preferential treatment to the purchaser, which is to deduct a certain percentage of the total payment due. Cash discount is usually reflected in the form of points, such as 2/10 (indicating 2% discount for payment within 10 days), 1/20 and so on.

For cash discounts, there are two options for accounting, one is the total price method, and the other is the net price method. In China's accounting practice, the total price method is usually used.

The current accounting system provides that cash discounts are treated as current expenses when they actually occur. Since the cash discount is calculated using the gross price method, the requirements of the accounting system and the tax law are completely consistent in the treatment of VAT, and the discount difference formed and included in the expenses can be deducted before tax. Because cash discount is a kind of capital concession given to customers in order to recover funds at an early date, it is essentially a financing act, and therefore a financial expense. According to Article 16 of the "Pre-tax Deduction Measures for Corporate Income Tax", pre-tax expenditures are stipulated.

For example, a company sells a batch of goods with sales of 10,000 yuan and payment terms of 2/10, 1/20, n / 30, and makes entries during sales:

Borrow: Accounts receivable 11700

Loan: Main business income 10000

Tax payable-VAT payable (output tax) 1700

If the other party pays within 10 or 20 days, the 2% or 1% underpayment due to the discount should be included in the "financial expenses" account.

Borrow: bank deposit 11500 (or 11600)

Finance costs 200 (or 100)

Credit: Accounts receivable 11700

Correspondingly, if the purchaser enjoys a cash discount, it should be credited as "financial expenses" as wealth management income.