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Which tax line should be assigned to "Discounts"?

I'm using QB Pro 2006, my wife has a small publishing company. She applies a fixed % discount on books sold to the authour and to customers such as resellers, libraries, etc.

Everything has worked out fine as far as day-to-day transactions and remitting the GST return. But now that it's tax time, I realise that the "Discount" account was setup without a Tax Line being assigned.

I assume this is a reduction of the cost of goods sold, but I'm unclear as to which tax line to assign to that account.

Any insight would be appreciated. TIA -A.

Reply to
Albert Camus
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Reply to
Steve Scott

Answered previously in news:alt.accounting -

A sales discount is generally a reduction of income, or in some circumstances an increase in selling expenses, but never a reduction of COGS.

The Tax Line for a reduction of income should be the same as for Income. If it is a selling expense (less likely), select an appropriate line for that purpose.

Why would you not ask your accountant?

Sounds reasonable Greg. No-one could make a better guess without looking at your chart of accounts and the tax lines you're using for existing accounts. Your accountant would be a good person to ask.

Reply to
!-!

Both the answers are USA centric.

Elsewhere this isn't the case. GST is more akin to a USA sales tax. The total it would have been sold with without discount could be the amount the tax is based upon. {Governments get maximum taxes always.]

Unfortunately I can't give any more help because I'm USA centered as well, but at least know the rest of the world is different. Of course if the > If it's money you never received how can it make a difference in your

Reply to
Golden California Girls

Reply to
femel

A good point. I assumed "Canada" for GST. In Canada, GST would be charged on the discounted price for this type of discount (on the pre-discount price for certain other types such as prompt payment or cash). If OP has been incorrectly accounting for the discount as part of COGS (!!!) as he implied, then he may have been over-charging GST despite his assertion that "everything worked out fine".

A fine example for several things:

- why questions should include details such as country, QB version, etc.

- why answers should include details such as country, QB version, assumptions, etc.

- why some of us frequently suggest "ASK YOUR ACCOUNTANT".

- why it may be a good idea to ask your accountant.

- how an attempt to save $50 by not asking your accountant might cost MUCH more because of consequential tax errors.

"Golden California Girls" wrote ...

Reply to
!-!

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