What is a Discount Rate?

The discount rate is the sales company giving profits to buyers, which is divided into commercial discount rate and cash discount rate.

Discount Rate

The discount rate is the sales company giving profits to the buyer, which is divided into

China's accounting system stipulates that when selling, the seller should record the receivables (that is, the amount before the cash discount), and the subsequent cash discounts should be recorded in the financial expenses; the buyer should also pay The amount of the payment is recorded and the financial expenses are deducted when the actual cash discount occurs. ^[1]

When calculating the discount, the cash discount should be calculated together with the product price and VAT.

Example: Company A sells a batch of goods to Company B, the price of the goods is 1 million, and the VAT rate is 17%. Company A gives company B a 10% business discount, with cash discounts of 2/10, 1/20, and N / 30.

The accounting entries made by Enterprise A are:

Borrow: Accounts receivable 105.3

Loan: Main business income 90 (100 * 10)

Tax payable-VAT payable (output tax) 15.3 (90 * 17%)

If Company B delivers the payment within 10 days, Company A will:

Borrow: bank deposit 103.194 (105.3-2.106)

Financial expenses 2.106 (105.3 * 2%)

Credit: Accounts receivable 105.3

The rest of the accounting entries and so on.