Differences in Accounting

1. Differences in Accounting Topic: Purchases and Discounts

2. Overview Purchases and Discounts

3. Details Austria • How do you book purchasing merchandise or material?Purchases: Booking to Purchases expenses; there is a booking for correction at the end of the year if the inventory amount changed.It is allowed to book to an inventory account too, but it is not usual. • How do you book the incidental purchasing costs?All purchasing costs are booked like the purchase itself. • Imediately granted discounts : You book only the amount deducted by the discounts • Later granted discounts: In this case the amount is just booked. Now you have to deduct the booked amount by another booking.

4. Details Denmark • How do you book purchasing merchandise or material?Immediately to inventory. • How do you book the incidental purchasing costs?like the goods. • Imediately granted discounts : Quantity: goods on the invoicePayment financial costs later • Later granted discounts: financial costs.

5. Details Germany • How do you book purchasing merchandise or material?Purchases: Booking to Purchases expenses; there is a booking for correction at the end of the year if the inventory amount changed.It is allowed to book to an inventory account too, but it is not usual. • How do you book the incidental purchasing costs?All purchasing costs are booked like the purchase, but to a special sub-account. • Imediately granted discounts : You book only the amount deducted by the discounts • Later granted discounts: In this case the amount is just booked. Now you have to deduct the booked amount by another booking to a special subaccount.

6. Details Estonia • How do you book purchasing merchandise or material?To the inventory account. • How do you book the incidental purchasing costs?All purchasing costs are booked to the inventory account. • Discounts : For discounts we book at first in the net amount. If discounts are not used we book the additional amount • How do you treat receivables and liabilities in foreign currency if the exchange rate changes?All foreign currency must be shown in balance sheet date rate.

7. Details Finland • How do you book purchasing merchandise or material?We will book them to Purchases expenses. • How do you book the incidental purchasing costs?We will book them to Purchases expenses. • Discounts : We will book the received discount when paying the invoice (Cash discount). • How do you treat receivables and liabilities in foreign currency if the exchange rate changes? • First we use the rate of the beginning date. • After payment we change the rate for the one of payment date. • Year closing: All pending invoices/receivables/liabilities in foreign currency will be rated again using the closing date rate. • Possible variations in every case will be booked as increase or decrease in financial costs.

8. Details Hungary • How do you book purchasing merchandise or material?2 possibilities: First to inventory and then to expenses or immediately to purchase expenses. • How do you book the incidental purchasing costs?Same way like goods. • Discounts :Immediately granted discounts : You book only the amount deducted by the discounts Later granted discounts : In this case the amount is just booked. Now you have to diminishe this booked amount by another booking. • How do you treat receivables and liabilities in foreign currency if the exchange rate changes?Receivables:lower of cost or market principleLiabilities:higher of cost or market principle

9. Details United Kingdom • How do you book purchasing merchandise or material?Booking to Purchases expenses. • How do you book the incidental purchasing costs?Same way like goods. • Discounts :See the following pages:

10. Types of discount • Trade discount • Settlement discount • Other discounts

11. Trade discount This term is used to describe a reduction in price that is offered to regular (trade ) customers. The discount is normally expressed as a percentage of the usual net price of the goods. E.g. Goods marked at £100 are offered at a discount of 10%. The revised price is £90 This becomes the new net price to the customer. VAT is calculated on the price of £90 The discount of 10% is not recorded as part of the double entry accounting.

12. Settlement Discount Settlement discount (cash settlement discount) is a discount that is offered to a customer as an incentive to pay an invoice quickly. It is expressed as a percentage with a time limit. For example, 5% settlement for payment within 7 days. This means that the customer may take 5% off the net price of the goods if payment is received within 7 days of the date of the invoice. An invoice is received for £200 with a 3% settlement discount for payment within 7 days. If payment is made within that period the amount to pay is £194

13. Settlement discount and VAT When an invoice is sent out with settlement discount the net price is shown as normal. In the UK it is quite common for the VAT to be calculated assuming the settlement discount has been taken. E.g. An invoice for £300 plus VAT is shown as 5% settlement for payment within 7 days. VAT is calculated on the sum of £285 (the discounted price). The amount of VAT shown is £49.87

14. Recording Settlement Discount. When the invoice is first recorded the details are recorded directly from the invoice, so net and VAT are recorded as on the invoice, and the total recorded in the debtors or creditors (according to whether it is a sales or purchase invoice). No record of the discount is made until a payment is made. If the discount is then taken: The actual amount received or paid is entered to the cash book. The amount of discount is recorded as a double entry. E.g. For a sales invoice There is a debit to a discount given account. There is a credit to the debtors account.

15. Other discounts A number of other discounts may be given, but it may not be clear from the description that it is a discount. For example, the following are forms of discount: Buy two and get one free. !0% off everything today 25% off to all new customers These are rather like a temporary trade discount. They are not recorded in the double entry bookkeeping.

16. Details IFRS International Financial Report Standards