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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 12-10-2018

Accepted Solutions
Established Community Backer ***

It depends If this is an early payment discount, then the...

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

17 Comments
Established Community Backer ***

It depends If this is an early payment discount, then the...

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

Established Community Backer ***

It may or may not be "per IRS" but if you do not enter th...

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.
Established Community Backer ***

per the IRS refers to not entering a qty discount separat...

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

Hi there faigy, I'm glad you join the Intuit Community. A...

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.

Established Community Backer ***

You need to qualify when this procedure is used, it is no...

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
Not applicable

Hello, How can I change my default discount account?   I...

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
Established Community Backer ***

Edit>Preferences>Bills>Company Preferences Change the de...

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
Not applicable

Hi MichelleT. I'm new using QB On-Line. I want to register a discount that the supplier makes on a purchase invoice. I can not find on my page, the button that you mention to apply the discount. Thank you

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

Moderator

Re: Hi MichelleT. I'm new using QB On-Line. I want to register a discount that the supplier makes...

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. 

 

Not applicable

Re: Hi MichelleT. I'm new using QB On-Line. I want to register a discount that the supplier makes...

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"?  

QuickBooks Team

Re: Hi MichelleT. I'm new using QB On-Line. I want to register a discount that the supplier makes...

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.

Frequent Explorer *

Re: It depends If this is an early payment discount, then the...

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

QuickBooks Team

Re: It depends If this is an early payment discount, then the...

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.

Frequent Explorer *

Re: It depends If this is an early payment discount, then the...

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.

QuickBooks Team

Re: It depends If this is an early payment discount, then the...

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!

Not applicable

Vendor Discount: Income vs Expense vs COGS?

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 -
QuickBooks Team

Re: Vendor Discount: Income vs Expense vs COGS?

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.

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