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Invoice with discount for Purchasing

pay discounts on purchases and invoices this is Ken Boyd the owner of st. Louis test preparation here's our Facebook page and the website the book cost accounting for dummies I'm teaching free online each week and the blog accounting accidently recent videos have talked about creating a purchase order and receiving inventory I want to go down that same route but this time I want to talk about getting terms discounted terms on an invoice that we get for buying something so the first thing I'm going to do is I created a purchase order I click on purchase orders and I click previous you see in this example in Prior videos this is mount top denim a vendor we're buying 300 pairs of outdoor jeans outdoor jeans is a product that we sell we markup and we sell to clients on retail basis so we're not manufacturing where they're just buying into inventory it's 12,000 dollars and I'm going to save and close that purchase order and now I'm going to go to receive inventory with a bill I'm going to click on a vendor mountaintop denim and the prop that pops up says there are open purchase excuse me open purchase orders exist for this vendor do you want to receive against one or more of these orders by that they mean purchase orders in other words does your bill apply to one of the existing purchase orders that you have I'm going to click yes select a purchase order to receive I'm going to check this purchase order and I'm going to hit OK now so far it looks like what we saw in Prior videos outdoor jeans is the item the product 300 pairs my cost is sturdy blue jeans my company is $40 but I'm going to do something new and that is I'm going to click on the terms button here and I'm going to say that the terms on this invoice are 2/10 net 30 that means we get a 2 percent discount if we pay within 10 days and the bill is due in 30 days so the discount date the date that I have to pay by to get the 2 percent discount is 3 7 13 today is 225 13 10 days out is 3 7 13 so I have to pay by 3 7 13 to get the discount everything else is data that we've seen before I'm going to click Save and close it says you have changed the terms for mountain type top denim would you like to have that information appear next time I'm going to hit yes because I'm going to assume the mountain top denim excuse me pays me or gives me a discount two percent within 10 days from each time from now going forward so it's a new payment term I'm going to hit yes so it does appear on the bill when I attach to a purchase order going forward so I'm going to hit yes so it's going to load that data in there and it closes it out the next thing I did was created an invoice to sell the 300 pairs of jeans that I bought for mountain top denim to my client Elm Street clothing so I opened an invoice and created one for Elm Street clothing 300 pairs outdoor jeans my retail price is 60 today's the 25th date of the invoice I'm also shipping them today but I'm going to put some terms on there for this invoice I'm going to offer Elm Street clothing a 2% discount if they pay within 10 days net 30 and I'm going to hit save and close on that transaction you've changed the transaction you want to record your changes yes I want to give them a discount do I want the terms to appear when I send invoices to Elm Street I'm a hit yes and so now I've created an invoice with terms on it the next thing I'm going to do is I'm going to receive the payment from Elm Street clothing for that invoice that I created it's kind of neat that QuickBooks has the arrows here to help you understand it so I'm going to go from create invoice to receive payment receive from I'm going to click on Elm Street you see that it gives me choices for invoices that I can pull up I'm going to check on this box number for now you'll notice something when I click on the invoice I get an error command that says you cannot apply an amount greater than the total payment plus any existing credits because what I want to do is what the system is proximate to do is let us know if you want to recognize the discount that they were able to play or not I'm gonna hit OK I'm going to click on the amount it brings me back to the invoice and I'm going to hit apply credits so when I hit apply credits I get a command that says QuickBooks is detected there are no credits or payments to apply to this invoice and there are no previously applied payments which is saying that we don't see any credits or payments that would reduce the amount of money that this person owes so so far we haven't accounted for the terms that are on the invoice yet so why don't we try clicking applied discounts and credits so this takes me to discounts and credits and it says suggest a discount is the 2% of the $18,000 because they're paying before the discount date of three seven they're paying on two twenty five so they're within the ten days and two percent of the eighteen thousand is $360 now I haven't designated an account yet for the discount so the example account I'm going to pick is called sales discounts with Jason an income account but it actually reduces income so when we look at the income statement you're going to see sales discounts reducing total sales and you see the description is discounts given to customers I got that account by collecting by selecting from examples I clicked on that tab someone hit save and close so it says it's sending the discount amount to sales discounts I'm going to hit done and we see what happened was is that the original amount and the amount due are still $18,000 with the discount is three hundred and sixty thousand I wonder what would happen if I click on this one now well I'm still getting that every message it says you cannot apply them out greater than the total payment plus the existing credits I'm going to hit okay because another thing I can do is enter the amount that they paid up here at the top where it says amount I can actually enter a physical amount an actual number well look what happens when I enter an amount seventeen six forty which was the eighteen thousand dollar invoice lists the discount when I entered that payment seventeen six forty it feeds into the payment category it also puts down an amount applied and an amount for discount and credit applied also fills now payment method I can put my check however I like I'm just going to put check I'm going to deposit it to checking because again I'm trying to avoid using that account cold undeposited funds I'm going to hit save and close and see what happens and to finish up let's go to reports company financial balance sheet I'm going to click on checking here which is the asset account and I see that I have a debit in cash to increase it for seventeen thousand six forty let's go to reports company financial income statement profit & Loss standard I should say and I see under sales income outdoor jeans if I click on the detail there's the eighteen thousand dollar sale that sales income for the outdoor jeans so I see that I got the sale loaded you'll also see that sales discount is a negative number that reduces total income by three hundred sixty thousand three hundred sixty dollars if I click on that there is a discount sales discount for Elm Street clothing for three hundred and sixty dollars it's a negative so it looks like we got everything posted correctly for receiving the payment so what we've seen is a purchase order receiving a bill for which we could pay a discount and then creating an invoice that allowed a client to pay us a discount and receiving an amount less the discount that's as far as we'll get on discount purchases on purchases and invoices for one-on-one tutoring you can go to the website STL tests net we also have additional videos and Excel spreadsheets I teach the cost accounting for dummies class free online each week 11 o'clock central and Saturdays and the blog is accounting accidentally thanks very much for watching and we'll see you next time