Definiton of discount for early invoice payment

Petri Tötterman petri at totterman.com
Mon Oct 19 16:59:24 EDT 2015


I am a very new user of GnuCash. Last month there was a thread concerning
the discount for early invoice payment. This is indeed very common business
practice, hence an important feature. I will try to provide an example how
this is done in my country (not US nor UK).

We have accounts both for purchase (received) rebates (negative expenses)
and sales (offered) rebates (negative income), having opposite signs from
what expected from an expense vs. income. Also we have accounts for VAT
claim from purchases and VAT debt from sales. In fact, the tax authority
demands purchases and sales with different VAT rates to be easily
identified from the ledger, hence we keep them in different accounts. Most
goods and services have 22 % VAT rate.


1. After purchasing goods, I receive a bill from the supplier, amount 1000,
terms 10 ./. 2 net 30

    A/P                                   credit 1000,00
    Expenses: Goods (VAT 22)  debet  819,67
    VAT claim                           debet  180,33

   I notice GnuCash handles this seamlessly.


2. If I pay the bill 10 days later, I can book the 2 % discount (= 20,00),
but rebates must be reported on their own account:

    A/P                        debet 1000,00
    Expenses: Rebates credit    16,39 (actually a "negative expense")
    VAT claim               credit     3,61
    Bank account         credit  980,00

I would like GnuCash to make these calculations for me. Also, both A/P and
VAT claim accounts should be given automatically. I have to select both the
transfer account (Bank) and rebate account (Rebates).


3. If I pay the bill 30 days later instead, I get no discount:

    A/P                          debit  1000,00
    Bank account          credit  1000,00

Sales are handled similarily.
To not make things too easy, discounts from other expenses not directly
related to Goods Sold are not booked in Rebates. Instead, they just
decrease the amount to be paid:

1. After buying ad space, I receive a bill from the supplier, amount 1000,
terms 10 ./. 2 net 30

    A/P                                credit 1000,00
    Expenses: advertising     debet   819,67
    VAT claim                       debet  180,33

2. I pay the bill 10 days later, hence I can book the 2 % discount:

    A/P                              debet  1000,00
    Expenses: advertising   credit      16,39
    VAT claim                    credit        3,61
    Bank account               credit    980,00

Again, I would like GnuCash to make these calculations for me. Also, both
A/P and VAT claim accounts should be given automatically. The transfer
account (Bank) and rebate account (Advertising) must be selected by me.

Discount for early invoice payment is IMHO a very important feature.
Knowing nothing of the programming efforts behind, I would suggest adding
in the "Process payment" window a second account to handle the discount.
This would be visible only if the discount period is valid. A/P and VAT
claim come from the bill, and Transfer account is selected as now.

Hope you can understand what I am trying to express.

/petri

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