cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

From one of our vendors, some of the bills are eligible for a percentage discount. 

What is the correct way of entering this discount. 

On the bill?  At time of payment? 

Does this get marked as an Income account or Expense Account ?

Thank you. 

Solved
Best answer December 10, 2018

Best Answers
Highlighted
Level 15

Correct way to enter a Discount on a Vendor Bill.

It depends

If this is an early payment discount, then the intuit response is correct. early payment like in the terms 2/10/net 30, and you use an income account for the amount of the discount

If this is a purchase discount, then No, there is no discount entered at all.  You enter the actual price paid <per the IRS

View solution in original post

23 Comments
Highlighted
Level 15

Correct way to enter a Discount on a Vendor Bill.

It depends

If this is an early payment discount, then the intuit response is correct. early payment like in the terms 2/10/net 30, and you use an income account for the amount of the discount

If this is a purchase discount, then No, there is no discount entered at all.  You enter the actual price paid <per the IRS

View solution in original post

Highlighted
Community Champion

Correct way to enter a Discount on a Vendor Bill.

It may or may not be "per IRS" but if you do not enter the bill but only cut the check then early payment terms would be disregarded other than what you pay is what you expense (cash basis) I would think.
Highlighted
Level 15

Correct way to enter a Discount on a Vendor Bill.

per the IRS refers to not entering a qty discount separately, and entering the actual amount you pay.
Highlighted
Moderator

Correct way to enter a Discount on a Vendor Bill.

Hi there faigy,

I'm glad you join the Intuit Community.

All you need to do is apply the discount when paying the vendor bills. This gets marked as an income since there is a price reduction instead of adding cost to the business.

Let me show you how to do this.

  1. Go to the Vendors menu. 
  2. Select Pay Bills.
  3. Select the vendor bill. 
  4. Click the Set Discount button.
  5. Enter the Amount of Discount.
  6. Select the Discount Account.
  7. You can click Add New if the income account is not yet listed.
  8. Click Done.
  9. Click Pay Selected Bills.

You can refer to the screenshots that I've attached.

Just leave me a comment below if you have further questions with discounts and bills - I'm here to help.

Highlighted
Level 15

Correct way to enter a Discount on a Vendor Bill.

You need to qualify when this procedure is used, it is not a blanket type thing of always do this
and the account for select an account (which is really NO help at all when answering a question) is income
Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Hello,
How can I change my default discount account?   I have been using a Cost of Good Sold account that has an account type as expenses.   I would like to move it above the line where it goes but am not allowed to because QB is saying that it is the default discount account.    Thank you
Highlighted
Community Champion

Correct way to enter a Discount on a Vendor Bill.

Edit>Preferences>Bills>Company Preferences

Change the default discount account that is close when automatic application of discounts is selected - or uncheck the box so that discounts are not automatic - then you can select account

But deducting from COGS is correct for items you purchase - "above the line"
(contra-income); when you give discount to customers
Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Captura de pantalla de 2019-02-17 17-48-12.png

Highlighted
Moderator

Correct way to enter a Discount on a Vendor Bill.

Hello ErnestoEE,

 

Thanks for providing us a screenshot of your bill payment.

 

The steps mentioned above are for QuickBooks Desktop users. In QuickBooks Online, you'll need to create a vendor credit and the system will allow you apply it to the future bill payments. 

 

To create a vendor credit, please follow these steps:

  1. Click on the Plus icon.
  2. Choose Vendor Credit.
  3. Select the vendor name and fill in the information.
  4. Click on Save and close.

 

When you make a bill payment, you'll see the Credits section at the bottom to apply the credit. 

 

 

Please don't hesitate to post more questions. We'll be right here. 

 

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Does that mean I need to create and apply a specific vendor credit for every bill every time I need to apply a "paid early discount"?  

Highlighted
QuickBooks Team

Correct way to enter a Discount on a Vendor Bill.

Hi there, SSPF.

 

Allow me to step in for a moment and provide the clarification that you're looking for.

 

You've got it right. You'll need to create a vendor credit when you need to apply a discount for early payment. For additional insight about this, I'm also including these articles:

Keep in touch if there's anything else I can do for you. I'm always here to help you out however I can.

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

I may be missing something, but what is the "Intuit response" you talk about? 

Highlighted
QuickBooks Team

Correct way to enter a Discount on a Vendor Bill.

Let me ease your confusion, @SWRG.

 

@Rustler is referring to the response provided by my colleague @MichelleT

 

As mentioned, when paying a vendor bill, you may directly apply the discounts and mark it as an income. Here's how:

 

  1. Click the Vendors menu. 
  2. Choose Pay Bills.
  3. Select the vendor bill. 
  4. Go to the Set Discount button.
  5. Type in the Amount of Discount.
  6. Select the Discount Account.
  7. You can click Add New if the income account is not yet listed.
  8. Click Done.
  9. Hit Pay Selected Bills.

That should do it! Feel free to visit us here in the Community if you have other questions about paying and applying discounts on bills. I'm always here to help.

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Ok, that part I have.  When entering the bill, I have the terms 1% 10th net eom, yet no date appears in the discount date box.  I would like to see the discount date, sometimes it can save us a couple hundred dollars.

Highlighted
QuickBooks Team

Correct way to enter a Discount on a Vendor Bill.

Hello, @SWRG.


Thanks for the prompt response. I’m here to share some information about the Discount Date box.

 

I created a bill using my sample company file. I chose 1% 10th Net 30 as the Payment Term and the Discount Date box fills out automatically.


If this is not the case on your end, you need to review the Terms List and check that they are all defined correctly. Here's how:

  1. Go to the Lists menu and select Customers & Vendor Profile Lists, then choose Terms List.
  2. Double-click the term.
  3. Check the setup and edit if necessary.
  4. Hit OK.

 

 

 

If you’re still experiencing the same problem even after ensuring the set up is correct, let's run the Verify and Rebuild Tool. This fix data damage on the company file. 

 

Rebuild Data:

  1. Go to the File menu.
  2. Choose Utilities, then select Rebuild Data.
  3. Select OK on the QuickBooks Information window.
  4. Follow the prompt to save a backup.
  5. When you see Rebuild has completed, click OK.

Verify Data:

  1. Go to the File menu.
  2. Choose Utilities, then select Verify Data.
  3. If you see QuickBooks detected no problem with your data, click OK. You can continue using the company file.
  4. If Verify finds an issue with your data, you’ll be prompted to Rebuild Now or View Errors.
  5. Select Close.

See resolve data damage on your company file for more information.

 

That should do it. Let me know if this works out for you, and if I can be of additional help. Take care!

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Hello, I'm a little confused. I'm in the same situation - I have a vendor invoice that will give us a 5% discount if paid within 60 days. QB Online wont allow us to set the automatic percentage. I need to set up a Vendor Discount account so I can do it manually. The discussion feeds say to set up an income account except when I try to set it up QBO tells me to use an expense account, see screenshot. IT also doesnt give me a discount option under Expense. And since this is a reduction in the price of the inventory item, why not just reduce COGS? Thank you -
Highlighted
QuickBooks Team

Correct way to enter a Discount on a Vendor Bill.

Let me help you ease your confusion, @Vacil.

 

Creating an income account that was discussed above is for QuickBooks Desktop users. As mentioned by my colleague GarlynGay, in QBO, you'll need to create a vendor credit so the system will allow you to apply it to the bill payments as a discount. I'm here to assist you with this.

 

First off, we'll need to create a vendor credit using the inventory item. Here's how:

 

  1. Click the Plus (+) icon.
  2. Select Vendor Credit.
  3. Choose the vendor name.
  4. Fill in the necessary information.
  5. Click Save and close.

Once done, you can now apply the vendor credit to the bill as a discount.  Please refer to the screenshot below.

Also, I want to let you know when creating a vendor credit will automatically reduce the COGS. However, I still encourage seeking help with your accountant. He/she could guide you which option to take based on your recording practice and business needs.

 

In case you need tips and related articles in the future, visit our QuickBooks Community help website for reference: QBO Self-help.

 

If you have any other questions, feel free to comment below. We're always here to help you.

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

what if they put the actual price for one item but also gave the discount amount in separate?

I've been trying so long to enter the discount amount in vendor bill but still i can't ....

Highlighted
QuickBooks Team

Correct way to enter a Discount on a Vendor Bill.

Hi arafath,

 

Your idea of adding the discount in the next line also works. Just make sure to select the right account to track it. I suggest consulting with an account on what account to use for your discount item.

 

Here's how to add a discount item.

  1. Go to +New, then Bill.
  2. Enter the Vendor name, in the Item details section add your item and amount.
  3. On the next line, click the drop-down arrow under Product/Service.
  4. Select + Add new.
  5. Choose Service, then enter "Discount" as your service name.
  6. Input other service item information.
  7. Hit Save and close.

Once done, enter a negative amount for the discount.

 

The attached screenshot below will show you how it looks like to add the discount on the bill.

 

I've also added this article about "How to group Accounts Receivable or Accounts Payable account types" for your reference.

 

Please let me know if you have other questions. I'm always here for you. Cheers.

billndisc.JPG

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

I have a related question.  How do I enter a discount on a check or credit card purchase.  We buy everything online, payment at checkout.  No Bill.  I have been using Contra-income account but it doesn't make sense to me because it's an income account and I have to enter the amount as a negative in the check/credit card purchase for it to reflect as a decrease in the amount owed but if it's an income account that account will also deduct the amount from income instead of counting it as income.

Highlighted
Moderator

Correct way to enter a Discount on a Vendor Bill.

Hey there, @Stay Up. Thanks for joining the thread. 

 

Since every business is different, I recommend touching base with your accountant to see what works best for your specific use-case.

 

Let me know if you have any other questions and I'll be happy to help out. Have a good one!

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Hi There,

 

I can see there are several ways to set up early payment discounts for vendors.  Just need clarification.

 

It does not make sense to me that the discount would be accounted for directly as income;  Yes it increases income but in the form of the reduction of the appropriate expense  - correct?  

 

If the above statement is correct - then I see that accounting for the discount can be tracked in several ways in QB Online:  1)  Create a vendor credit memo and apply at time of payment using the same product/service code as the original invoice;  2)  Set up a product / service line item assigned to the appropriate / corresponding account number for vendor expense and enter onto invoice as an additional "negative" amount to reduce the total invoice appropriately;  3)  Reduce the amount of the invoice entered at the time of entry by the discount.

 

*for #2 - for our particular company this item code could be easily be set up and used since any discounted purchases would be expensed to the same GL account.  In addition this would allow for tracking discounts should we wish to do so.

 

Am I on the right track here with the above?  

 

Thanks and hope you are staying healthy and safe.

Highlighted
Level 1

Correct way to enter a Discount on a Vendor Bill.

Which income account should be used 

Need to get in touch?

Contact us