Chapter Four- VAT and Discounts Flashcards
Bulk Discount
A percentage discount from the list price of goods and services. Calculated after any trade discount has been deducted. Designed to encourage large orders
Discounts Allowed Day Book
The book of prime entry where all the credit notes for prompt payment discounts taken by credit customers are listed
Discounts Received Day Book
The book of prime entry where all the notes for prompt payment discounts received by the business are listed
Gross Total
The total of the invoice after VAT is added to the net total
Input Tax
VAT on purchases and expenses. Input VAT can be recovered from HMRC
List Price
The seller’s stranded price before any discounts have been deducted
Net Total
The total of the invoice before VAT is added
Output Tax
VAT on sales. Output VAT is paid to HMRC
Prompt Payment Discount
A percentage discount from the net total offered in order to provide an incentive to pay the invoice amount early. Appears only in a terms note on the invoice, not as a deduction from the net or gross total
Trade Discount
A percentage discount deducted from the list price of goods and services. Offered to some long-standing customers or participants in the same trade, or as an incentive to new customers
Value Added Tax (VAT)
A government tax which must be added to the list price of goods and services. The difference between input tax and output tax is paid to HMRC, or refunded from HMRC every three months
VAT Credit Note
A credit note issued to a customer if the customer chooses to take a prompt payment discount, showing the decrease in the invoice net, VAT and gross total due to the prompt payment discount
VAT Return
A statement sent every three months to HMRC showing the total input tax suffered, the total output tax charged and the balance due for payment/refund
