Exercise Calculating CashSettlement Discounts The IAB syllabus by JustinRyer

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									                                               Exercise
                                 Calculating Cash/Settlement Discounts

The IAB syllabus says you must be able to ‘account for discounts received and
allowed’. Refer to pages 4.6 and 4.7 in exercise book.
Use normal rounding

     1. What is the VAT on an invoice with a net value of £45 and a prompt
        settlement discount of 5%?
            a. Calculate 5% of £45
            b. Subtract this from the £45
            c. Calculate VAT on this at 15%

     2. What would be the invoice total on this invoice?
          a. Take the original net amount of £45
          b. Add the settlement discount calculated in 1 above.

     3. If the customer actually paid within the settlement period, how much would
        they pay?
             a. Take the original net amount of £45
             b. Calculate 5% of £45
             c. Subtract this from the £45
             d. Add this back to the VAT calculated at 1 above.

     4. How much less than the invoiced amount did the customer write the cheque
        for?
            a. Take the invoiced amount calculated at 2 above.
            b. Subtract the amount calculated at 3 above.

     5. If the goods sold cost £100 and a 5% Cash/Settlement discount was offered,
        how much VAT would be shown on the invoice?

     6. What would be the invoice total?

     7. If the customer actually paid within the settlement period, how much would
        they pay?

     8. How much less than the invoiced amount did the customer write the cheque
        for?

     9. What is the VAT on an invoice with a net value of £457.50 and a prompt
        settlement of 2%? Assume VAT at 15%

     10. What would be the invoice total on this invoice?

Further reading:
http://www.sageforum.co.uk/viewtopic.php?t=5692&sid=a0cd5c221d1e072b7ebce18
375d23ca8

        Answers: 1. £6.41; 2. £51.41;3. £49.16 4. £2.25 5. £14.25; 6. £114.25; 7. £109.25; 8. £5.00; 9. £67.25; 10. £524.75



Settlement Discount Exercise.Doc

								
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