I wonder if anyone can advise on which code you would post money which is received into the business for reward programs. I have a situation where my client has bought a HP printer and in return has received a £60 cash back.. Should this be recorded as miscellaneous income, or offset the original cost price of the printer? also, should I account for VAT on the cash back amount?
I deduct cashbacks from the cost of the asset to which it relates which is the reality of the situation.
To treat them as revenue, even as miscellaneous income would overstate gross profit (and net profit if expensed rather than capitalised) and also skew some of the key ratio's.
The Cashback will include a VAT element (the manufacturer will have accounted for that automatically in the cashback) so you must adjust your input VAT accordingly (so that would be by £10 on the £60).
p.s. I'm sure that this editor steals some of my words when I post! Just fixed the grammar, the message is still the same.
-- Edited by Shamus on Tuesday 25th of February 2014 01:36:31 PM
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Shaun
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