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In a previous work, we analyzed the operations that came to modify (downwards = reductions), other previous, main operations, from which they came. In the present work, we are going to delve more about a type of rebate, the discount, and above all, its double materialization in the documentation and in the accounting records.

In commercial and commercial traffic, it is highly common to find operations, whether of purchase or sale, in which there are discounts or reductions in price.

A discount is nothing more than a reduction or reduction in the purchase price of a certain product or service, motivated by a series of circumstances, derived from the characteristics of the purchase or sale operation.

The reasons that can motivate these reductions, rebates or discounts are the following:

  • Discount for prompt payment. This discount is usually given, as its name indicates, when the debtor of the operation (buyer) liquidates it before its maturity, so that the creditor (seller) grants him a reduction by virtue of this collection before maturity.
  • Discount for purchase volume. Better known as "rappel" in accounting slang. This discount is usually granted when the buyer has reached or exceeded a certain purchase volume, previously agreed with the seller.
  • Generic discount. It does not obey any of the patterns described above. It is simply a discount agreed between buyer and seller, which is not due to a discount for prompt payment, nor to a discount for volume of operations. For example, this reduction may be due to a lack of compliance with agreements, which is compensated in this way (delays in delivery, supplying a different quantity than ordered, defects or quality differences in the merchandise supplied, etc ...).

These discounts or rebates can be presented, in a documentary manner, in two very different ways, causing different forms of accounting records. The objective of this work is to analyze the implications that these discounts have in accounting records, depending on the way in which they are reflected in the corresponding invoice. In essence, there are two ways in which they can appear reflected:

Inside invoice. It implies that they are an intrinsic part of the operation from which they originate, and as such, they are reflected in the same invoice, together with the operation in which they originate. Therefore, it is based on the fact that said discount has been negotiated together with the main operation, from which they originate. As an example, we use all kinds of operations in which, in the same invoice of the main operation, some type of discount or reduction is collected, with only one document for the net amount of the operation (gross amount - discount applied).

  • Out of invoice. It implies that they are not an intrinsic part of the main transaction, as they have not been negotiated at the same time as said main transaction. Therefore, they appear in a different and independent document from this main operation (corresponding credit invoice or corrective invoice). As an example, any operation that has generated a purchase invoice for the main operation, and a subsequent payment invoice (or rectifying invoice) that reflects the amount of the discount, serves as an example.

The net effect on the profit and loss account is identical, since the purchase transaction will appear reflected by its net amount (gross amount - discount applied), but in the first case it will be as a result of a single accounting record (a single document ), and the second will require two accounting records (two documents).

We are going to see both differences, starting from the basis of the same example: an operation to purchase raw materials, with various discount formats, on and off the invoice.

RAW MATERIAL PURCHASE OPERATION (applicable VAT: general rate 21%). DISCOUNTS WITHIN INVOICE.

Suppose that our company makes a purchase of raw materials, amounting to 1,000 euros. The usual form of payment, with this provider, is 60 days. As our liquidity position is favorable, at the same time we formalize the transaction, we agree to a 2% discount for prompt payment, which is included in the merchandise purchase invoice.

Purchase with a discount for prompt payment within the invoice Should To have
(601) Purchase of raw materials 980,00  
(472) H.P. VAT supported 205,80  
(400) Providers   1.185,80
     
(400) Providers 1.185,80  
(57X) Treasury (cash or banks)   1.185,80

 

Now suppose that we buy a new batch of raw materials, this time from another supplier, for the amount of 5,000 euros. With this purchase, we reached the objective established in the contract (purchase volume of 100,000 euros), by virtue of which, once said objective has been reached, the supplier gives us a volume discount of 1,500 euros. The discount is reflected in the same purchase invoice for the merchandise. We accept I will pay the supplier, for the payment of said invoice.

 

Purchase with volume discount within invoice Should To have
(601) Purchase of raw materials 3.500,00  
(472) H.P. VAT supported 735,00  
(400) Providers    
     
(400) Providers 4.235,00  
(410) Suppliers trade bills to pay   4.235,00

 

In a third purchase operation, from a different supplier, for an amount of 2,000 euros. Between the receipt of the merchandise and the issuance of the final invoice, we found a series of discrepancies between what was agreed with the supplier, and the merchandise actually served. We reached an agreement with the supplier, by virtue of which, we kept the goods supplied, but with a discount of 200 euros, due to the discrepancies found. We pay the supplier by bank transfer. 

 

Purchase with generic discount within invoice Should To have
(601) Purchase of raw materials 1.800,00  
(472) H.P. VAT supported 378,00  
(400) Providers   2.178,00
     
(400) Providers 2.178,00  
(572) Banks, checking account   2.178,00

 

As we can see, when the discount is part of the same invoice, it is not reflected as such in the accounting, but the purchase operation is reflected, from the first moment, by the net amount of the operation (gross amount - discounts practiced ). In this way, no trace of the nature of the three types of discounts that our suppliers have applied to us appears in the accounting records.

RAW MATERIAL PURCHASE OPERATION (applicable VAT: general rate 21%). OFF-BILL DISCOUNTS.

Suppose that our company makes a purchase of raw materials, amounting to 1,000 euros. The usual form of payment, with this provider, is 60 days, and is what was initially agreed.

As our liquidity position is favorable, once we received the corresponding invoice for the previous operation, we agreed on a 2% discount for prompt payment, and we settled the operation immediately.

 

Purchase with a discount for prompt payment outside the invoice Should To have
(601) Purchase of raw materials 1.000,00  
(472) H.P. VAT supported 210,00  
(400) Providers   1.210,00
     
(607) Discount on purchases for prompt payment   20,00
(477) H.P. Supported VAT   4,20
(400) Providers 24,20  
     
(400) Providers 1.185,80  
(57X) Treasury (cash or banks)   1.185,80

 

Now suppose that we buy a new batch of raw materials, this time from another supplier, for the amount of 5,000 euros.

With this purchase, we reached the objective established in the contract (purchase volume of 100,000 euros), by virtue of which, once said objective has been reached, the supplier gives us a volume discount of 1,500 euros. The reduction is reflected in a subscription invoice that our supplier later sends us. We accept I will pay the supplier, for the payment of said invoice.

 

 

Purchase with off-invoice volume discount Should To have
(601) Purchase of raw materials 5.000,00  
(472) H.P. VAT supported 1.050,00  
(400) Providers   6.050,00
     
(609) Rappels sobre compras   1.500,00
(477) H.P. VAT Supported   315,00
(400) Providers 1.815,00  
     
(400) Providers 4.235,00  
(410) Paid commercial paper suppliers   4.235,00

 

In a third purchase operation, from a different supplier, for an amount of 2,000 euros. We receive the merchandise, and a few days later, the corresponding invoice.

When reviewing the merchandise, we found a series of discrepancies between what was agreed with the supplier and the merchandise actually served. We reached an agreement with the supplier, by virtue of which, we kept the goods supplied, but with a discount of 200 euros, due to the discrepancies found. We pay the supplier by bank transfer.

 

Purchase with generic discount within invoice Should To have
(601) Purchase of raw materials 2.000,00  
(472) H.P. VAT supported 420,00  
(400) Providers   2.420,00
     
(608) Returns of purchases and similar operations   200,00
(472) H.P. Supported VAT   42,00
(400) Providers 242,00  
     
(400) Providers 2.178,00  
(572) Banks, checking account   2.178,00

 

As we can see, when the discount is not part of the same invoice, it does appear reflected as such in the accounting; In other words, the nature of the different types of discounts practiced is reflected, when these appear in a separate document (credit invoice or rectifying invoice), generating different accounting records, depending on the type of discount practiced.

Fiscally, the effect on direct taxation (IFPF or IS) and indirect taxation (VAT) is identical, as it could not be otherwise.

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