Cash discount query

If purchase value after allowing cash discount( discount received at time of sale) Rs. 180000+GST at then cash discount received Rs. 30000 at time of sale it is required to record in the books? Actual Cost Rs. 210000 after cash Rs. 180000,gst is charged on Rs.180000? what is purchase cost Rs 180000 or 210000?
Replies (4)
Quick Summary
This discussion clarifies how to account for cash discounts received at the time of sale. It explains that GST is typically calculated on the discounted price, and the true purchase cost for the buyer is the net amount paid after the discount. The cash discount itself is considered income for the purchaser and an expense for the seller, impacting their respective Profit & Loss accounts.

  1. Taxes always calculate cost of goods sold minus cash discount in invoice  only.
  2. The invoice amount caculation will be as follows.
  3. item price x item amount = item subtotal.
  4. ( item subtotal - item discount ) + item tax = item total.
  5. ( item total - invoice discount ) + invoice tax = invoice amount.
The cost to the purchaser will be 180000
The correct analysis for cash discount
cash discount is an expense for the seller and income for the purchaser so the cost would be the total value.
i.e. actual cost - 2,10,000/- , cash discount shown in p&l for seller.
Actual cost shall be 2.10 lac and rs 30k shall be credited to p&l account

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register