VAT and discounts Flashcards
What is VAT?
-A government tax which must be added to the selling price of goods and services. The difference between input tax and output tax is paid to HMRC, or refunded from HMRC, every three months.
What is 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.
What are the 2 formulas for VAT?
-VAT = net amount x rate of VAT as a %.
-VAT = Gross amount x VAT / (VAT + 100).
What is a trade discount?
-A percentage reduction from the list price of goods or services. The list price is the seller’s standard price before any discounts have been deducted.
What is a bulk discount?
-A percentage reduction from the list price of goods or services, offered because the customer’s order is large.
What is a prompt payment discount?
-A percentage discount of the gross total that is offered to a customer to encourage that customer to pay the invoice earlier.
What is a 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.
What is the discounts allowed daybook?
-It is a book of prime entry used to record prompt payment discounts taken by credit customers. It is a discount allowed as the business has allowed the customer to take the discount.
What is the discounts received daybook?
-It is a book of prime entry where all the credit notes for prompt payment discounts received by the business are listed.
