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Post Info TOPIC: How to calculate VAT and cash discount?
ahmad


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How to calculate VAT and cash discount?
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Hi guys,  

I am always confused when I do invoices with cash discount. VAT is not my one of the favrouit topic. Please can you help me with the followings:

1. Total goods £1280.00 including delivery cahrges £ 65.00

cash dicount 2.5 % 30 days net. what will be the VAT and invoice total amount? VAT rate 17.50%

2. Total goods £910.00 including delivery charges £40.00 

Trade discount 5.% still need to apply. 2.5% cash discount 30 days net

again what will be VAT and invoice total amount? VAT rate 17.50%

 



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Stardoe


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Hi ahmad,

With early settlement discount you take 2.5% (or whatever rate it is) of the net amount and deduct it from the net amount and then calculate the VAT on this amount, giving you the total of the invoice.

With trade discount, you deduct this from the net amount first and then calculate the early settlement discount on this amount, and calculate VAT in the same way as above.

Hope this gives you the information you need to work out the above

Pauline

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Pauline
Sylvia


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I have a couple of queries, I think the Delivery taken off before working out trade discount and cash discount (adding it before calculating the VAT). Also the invoice total is net before cash discount plus delivery plus the VAT calculated after cash discount.  Is this right?

Thank you Sylvia



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