Trade discounts are discounts that businesses offer to customers. This discount is applied when customers fulfill certain conditions, such as purchasing in bulk. Let's learn more specifically about the ways with Viindoo Accounting for trade discounts in the following article.
1. How to account for trade discounts
1.1 Case 1: The selling price on the invoice includes commercial discounts for customers
In this case, the Accounting for trade discounts has been agreed and recorded by both parties before invoicing. Therefore, the value recorded on the invoice already includes the trade discount, so the accountant does not need to separately account for this discount.
The seller accounts for:
Debit Account 111, 112
Debit Account 131
There is Account 3331
The buyer accounts:
Debit Account 156
Debit Account 1331
There are accounts 111, 112, 331
Accounting for trade discounts
Example 1: Company A sells to Company B 10 products X at a selling price of 1 product of 4,000,000. According to company A's regulations, if a customer buys 10 products at once, he or she will receive a 10% discount on the selling price excluding VAT. After discount, the remaining amount is 3,600,000 per product. Company A and Company B have agreed on a trade discount for this shipment. At the same time, the two parties decided to issue an invoice with a value that includes a commercial discount.
Seller:
Debit Account 131: 39,600,000
Credit account 5111: 36,000,000
Credit account 3331: 3,600,000
Buyer:
Debit Account 156: 36,000,000
Debit Account 1331: 3,600,000
Credit account 111, 112, 331: 39,600,000
1.2 Case 2: Trade discount because customers make multiple purchases
Discount for customers who purchase multiple times
In this case, there are two accounting situations due to the difference between the discount amount and the final invoice amount:
1. If the discount amount is less than the amount on the final invoice received by the buyer, the discount amount will be deducted directly from the final invoice.
The seller accounts for:
Debit Account 131, 111, 112
There is account 511
There is Account 3331
The buyer accounts:
Debit Account 156
Debit Account 1331
There are accounts 111, 112, 331
Example 2: Company A sells product Y to company B. According to the agreement, if company B buys 10 or more products Y, it will enjoy a 10% discount on the selling price excluding VAT. The selling price of each product Y is 3,000,000 VND.
Company B makes purchases as follows:
- 1st time: Buy 4 products
- Second time: Buy 4 more products
- Third time: Buy 2 more products
After 3 purchases, company B is eligible for a trade discount.
Seller:
Debit Account 131: 6,600,000
Credit account 5111: 6,000,000
Credit account 3331: 600,000
Buyer:
Debit Account 156: 6,000,000
Debt to Account 1331: 600,000
Account 331: 6,600,000
2. If the discount amount is greater than the amount on the final invoice, the accountant needs to prepare an invoice to adjust the reduction of previous invoices and account for this adjustment.
Seller:
Accounting for trade discounts incurred during the period by recording in revenue deduction:
Debit Account 521 (Circular 200) / Debit Account 511 (Circular 133)
Debit Account 3331
There are accounts 131, 111, 112
Buyer:
Because purchased goods will be used for many purposes, the trade discount that the buyer receives will be recorded in many different ways:
- If the goods are in stock: The accountant records a decrease in inventory value.
Debit account 111, 112, 331
There is Account 156
There is Account 1331
- If the goods are sold: The accountant records a decrease in cost of goods sold.
Debit account 111, 112, 331
There is account 632
There is Account 1331
- If the goods are used for management, production, business or capital construction activities:
Debit account 111, 112, 331
There are accounts 154, 241, 641, 642…
There is Account 1331
In case if the promotion program ends and then issues an invoice, the business will do the same accounting as if the discount amount is larger than the amount on the final invoice.
For businesses applying the accounting regime according to Circular 200, at the end of the period, reductions in sales prices will be transferred to the revenue account:
Debit Account 521
There is account 511
However, if the enterprise applies the regime according to Circular 133, there will be no such entry.
Example 3: Company A sells product Z to company B (both companies apply the accounting regime according to Circular 200). According to the agreement, if company B buys 10 or more products Y, it will enjoy a 10% discount on the selling price including VAT. The selling price of each product Y is 10,000,000 VND, VAT 10%.
Company B makes purchases as follows:
- 1st time: Buy 4 products
- Second time: Buy 5 more products
- Third time: Buy 1 more product
After 3 purchases, company B is eligible for a trade discount.
Seller:
Debit Account 521: 10,000,000
Debit Account 3331: 1,000,000
Account 131: 11,000,000
Buyer:
Debit Account 331: 11,000,000
Account 156, 632, 154, 241, 641, 642...: 10,000,000
Credit: Account 1331: 1,000,000
2. Contents on the commercial discount invoice
The content on the commercial discount invoice is regulated according to Article 14 of Decree 123/2020/ND-CP as follows:
- Name, unit, quantity, unit price of goods and services;
- The total amount does not include value added tax.
- Value added tax tax rate
- Total amount of value added tax according to each type of tax rate.
- Total value added tax.
- Total payment includes value added tax.
- In case a business establishment applies commercial discounts to customers or promotions according to the provisions of law, the invoice must clearly state the discount or promotion.
Determination of value-added tax calculation price in case of applying trade discounts or promotions is carried out in accordance with the provisions of VAT law.
Fees and charges belonging to the state budget, trade discounts and promotions (if any) are implemented according to the instructions in Point e, Clause 6, Article 14 of this Decree and other related contents.
One way to simplify the process of accounting for trade discounts is to use accounting software. Thanks to integrated features and tools, accounting software helps businesses manage discounts more accurately, quickly and effectively than manual methods.
One of the effective accounting software that helps minimize operations for accountants is Viindoo Accounting. In particular, Viindoo Accounting with the "Set up Payment Discount" feature will help make the process of accounting for trade discounts simpler. Accountants can implement discount rules, and the software will record and pay payment discounts to customers flexibly. For example, the image below is setting up a discount when the Customer pays on time and receives the discount
In addition to the above features, Viindoo Accounting also offers many other outstanding features such as:
- Automate all accounting operations of the business.
- Control data throughout in real time.
- Comply with multinational accounting principles and standards.
- Cash flow forecasting, effective corporate financial planning.
- Asset depreciation management
- …
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The above article by coming has compiled for you related information How to account for trade discounts. Hopefully the above information by Viindoo will be useful and help businesses account for discounts in business activities more accurately and quickly.