If a buyer is given a discount after the sale: how does account 9050 work and how is revenue reduced?

The goods are shipped, the invoice is issued, the revenue is in 9020. A month later the buyer calls: "Where is the bonus we agreed on?" — or says: "The tables are scratched, lower the price." How should the past sale be reduced now: correct 9020 directly with a red reversal, or use a separate account? NAS No. 21 provides a separate account for this: 9050 "Discounts granted to buyers and customers".

Which discounts is 9050 meant for?

Paragraph 382 of NAS No. 21 lists two kinds of discount: - sales discounts granted under the terms of the contract (a volume bonus, a reward paid when a set condition is met); - price discounts granted as a result of unfitness being found in the products, goods, work or services sold.

The account is a contra-liability account to the 9000 group: its debit reduces income and is linked to receivable accounts. That is, the original sales amount in 9020 does not change, while the discounts are collected separately next to it. At the end of the month the manager sees two figures separately: "how much we sold" and "how much we gave back as discounts".

Is 9050 needed if the discount is given at the time of sale?

If the price is reduced on the invoice itself, the amount presented to the buyer is already the amount after the discount. Under paragraph 380, 9010-9030 record net revenue, so revenue is recorded at that reduced amount. The tax side is the same: a taxpayer that grants a discount on the turnover date determines the VAT base from the price after the discount (Tax Code, part two of Article 248). 9050 is needed for discounts that arise after the sale.

Example: December at "Bogishamol Mebel"

"Bogishamol Mebel" LLC is a wholesaler, keeps its goods in 2910 and is a VAT payer. In December (all hypothetical): - kitchen tables worth 300 000 000 soum (excluding VAT) were sold to shops, VAT 12%: 36 000 000 soum, cost 210 000 000 soum; - the contract with the "Uy Jihoz" shop contains the condition "if more than the set volume is taken in the quarter, a bonus is granted". The condition was met, and at the end of the quarter a bonus of 15 000 000 soum (excluding VAT) was accrued; - the "Qulay Uy" shop found that 4 tables were scratched. It is not returning the tables; by agreement the price was cut by 2 000 000 soum (excluding VAT).

Result: net revenue 300 000 000 − 17 000 000 = 283 000 000 soum, gross profit 283 000 000 − 210 000 000 = 73 000 000 soum. Note that the cost did not change. The tables did not come back to the warehouse; only the price fell. That is the difference from a return: a return uses 9040, and the cost of the goods is also restored to the warehouse.

What happens to VAT?

Both discounts reduce the VAT base, but on different grounds. The volume bonus: since the condition is written in the contract, item 4 of part one of Article 257 of the Tax Code applies. The price cut for a defect is a change in the transaction price, item 3. VAT reduction: 15 000 000 × 12% = 1 800 000 soum and 2 000 000 × 12% = 240 000 soum. Which document is used and in which period the adjustment is made is covered in detail in today's tax article.

On the accounting side there is one subtle point. For a return (9040), NAS No. 21 clearly says that VAT charged earlier is recorded to the debit of the budget liability account (paragraph 381). Paragraph 382 on 9050 and the table, however, do not give a separate line for reducing VAT. So set once in the accounting policy which pair of accounts you use to record the VAT reduction on a discount, and always stick to it.