Cash discount accounting

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Snehal Patel (Querist)
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11 February 2016 hi sir, I am new to business and we are engaged in distribution business. we would like to offer cash discount to our buyers so please guide us how to take this discount given In our accounts. I.e. if I had raised invoice of Rs. 1,00,000/- and if my buyer dealer is giving payment within 7 days then I want to give 2% cash discount to him but if he is paying after offered period he is not liable to get this discount. so how should I generate invoice. in invoice itself I can't deduct that 2% because if he pays late then we can't revise invoice. And if I give discount after generating invoice then I should bare loss of Vat also on that 2%. kindly brief me how I should give cash discount. regards, Snehal Patel

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Guest (Expert)

11 February 2016 Dear Patel, What you may do is that once a customer pays within 7 days, you can give that discount in next sale and VAT can be paid on amount after reducing discount. If that is not possible, there is no way to save VAT on discount.