What are revenue deductions? How to calculate deductions

Revenue deductions are expenses that affect a business's revenue from selling products and services. Follow the article below from 1C Vietnam to learn more about the concept, calculation formula as well as how to accurately account for revenue deductions.

1. What are revenue deductions?

According to the provisions of Circular 200/2014/TT-BTC, revenue deductions are the adjusted amount deducted from revenue from sales of goods/services in the accounting period and recorded in Account 521. However, , this account does not include taxes deducted directly from revenue such as output VAT payable by the direct method.

The process of accounting for revenue deductions needs to comply with the Corporate Income Tax Law and related instructions. To ensure legality and transparency, businesses need to accurately record relevant documents.

2. What do revenue deductions include?

According to Circular 133/2016/TT-BTC and Circular 200/2014/TT-BTC, revenue deductions include the following 3 types:

• Trade discount: Is the amount of money a business reduces the price of goods and products for customers to buy in large quantities.
• Discount on sales price: Is the amount of money a business reduces in price to customers when the goods are of poor quality or do not meet the conditions in the contract.
• Returned goods: Are the number of goods and products returned by customers due to poor quality or unsuitability.

3. How to calculate revenue deductions correctly

To calculate revenue deductions , businesses need to clearly understand revenue deduction accounting accounts. According to the provisions of Circular 200/2014/TT-BTC, account 521 has:

• Account 5211 - Trade discount (CKTM)
• Account 5212 - Sold goods returned
• Account 5213 - Discount on goods and services

The structure of the 521 account includes:

Debtor:

• The amount of CKD the business needs to pay to the customer
• The number of returned goods the business accepts from customers
• Revenue from returned goods and businesses refunding customers or deducting from accounts receivable from customers for sold goods

Party has:

• The amount of trade clearance, sales discounts, and revenue from returned goods are transferred to account 511.
• Account 521 has no balance at the end of the period.

4. How to account for revenue deductions according to Circular 200

Accounting for revenue deductions according to Circular 200 is an important process to ensure accuracy and transparency in business accounting.

4.1. Accounting for trade discounts

In case an enterprise applies the VAT deduction method:

• Debit Account 5211: Trade discount.
• Debit Account 3331: Reduced VAT to be paid.
• Account 111, Account 112, Account 131: Total discount value for customers.

In case an enterprise applies the direct method:

• Debit Account 5211: Trade discount amount.
• Account 111, Account 112, Account 131: Total discount value for customers.

4.2. Accounting for sales discounts arising during the period

In case an enterprise applies the VAT deduction method:

• Debit Account 5213: Decreased value of goods.
• Debit Account 3331: VAT reduction.
• Account 111, Account 112, Account 131: Total value of goods reduced for customers.

In case an enterprise applies the direct method:

• Debit Account 5213: Decreased value of goods.
• Account 111, Account 112, Account 131: Total value reduced for customers.

4.3. Accounting for goods returned by customers

Accounting reflects revenue from returned goods:

Enterprises calculate VAT using the deduction method:

• Debit Account 5212: Revenue from returned goods decreased.
• Debit Account 3331: Reduce the amount of VAT to be paid.
• Account 111, Account 112, Account 131: Total revenue including reduced tax.

Enterprises calculate VAT using the direct method:

• Debit Account 5212: Revenue from returned goods decreased.
• Account 111, Account 112, Account 131: Total revenue including reduced tax.

Accounting reflects the value of goods re-entered into the warehouse and records a decrease in the cost of goods re-entered into the warehouse:

• Debit Account 156: Value of goods imported into warehouse.
• Credit Account 632: Cost of goods re-imported to warehouse decreased.

5. How to account for revenue deductions according to Circular 133

The method of accounting for revenue deductions according to Circular 133 is not much different from the method of accounting according to Circular 200.

5.1. For businesses that calculate VAT using the deduction method

Trade discounts are accounted for as follows:

• Debit Account 511: Discount for customers does not include VAT.
• Debit Account 333: VAT on the value of discounted goods for customers.
• Credit Account 131: Discount value.

Sales discounts are accounted for similarly as above.

Sales returns are accounted for as follows:

• Debit Account 511: Value of returned goods sold does not include VAT.
• Debit Account 333: VAT on returned goods.
• Credit Account 131: Value of returned goods.

5.2. For businesses, calculate VAT using the direct method

Accounting for trade discounts and sales discounts is similar to above.

Sales returns are accounted for as follows:

• Debit Account 511: Value of returned goods sold does not include VAT.
• Credit Account 131: Total value of returned goods.

6. Principles for implementing revenue deductions

6.1. Principles of implementing trade discount accounting

When implementing trade discount accounting, businesses need to comply with the following principles:

• In case the VAT invoice/sales invoice shows a commercial discount for the buyer and the selling price on the invoice has been adjusted according to the discount: The enterprise does not use this account, but records sales revenue. goods at price minus discounts (net revenue).
• Accountants need to separately track trade discounts that have not been reflected on invoices, which often arise in cases such as discounts greater than the value of sales recorded on the invoice, or when the manufacturer confirms the amount at the end of the period. determine the quantity of goods consumed.

6.2. Principles of accounting for sales discounts

On the seller of goods, the accounting for discounts on sold goods shall be carried out according to the following principles:

• In case the VAT invoice or sales invoice shows a discount for the buyer and the selling price on the invoice has been adjusted according to the discount: The enterprise does not use this account, but records sales revenue according to price has decreased (net revenue).
• Discounts after sales have been made and invoices issued are reflected in this account, such as discounts due to poor quality sold goods.

6.3. Principles of accounting for returned goods

For products and goods returned by customers due to breach of commitment, breach of contract, or goods sold of poor quality, loss of quality, or incorrect type. When accounting for revenue deductions, the following principles should be kept in mind:

• Accountants need to track details of trade discounts, sales discounts, and sales returns for each customer and product type.
• At the end of the period, these amounts are transferred to account 511 to determine the net revenue of the actual volume of products, goods and services.

7. Some notes on revenue deductions

Businesses should pay attention when checking, inspecting and finalizing taxes on revenue deductions :

• For construction companies, revenue deductions are only applied upon agreement and handover of assets, not upon quality violations and warranties must be implemented according to contract terms.
• Commercial discounts need to be clearly shown on invoices or policy documents for customers.
• In case the goods are returned, a return invoice from the buyer is required for proof.
• Sales discounts are not applied when there is no registration for a promotional program or when the discount level exceeds 50%, according to the provisions of the 2005 Commercial Law and Decree 81/2018/ND-CP.

8. Effective solution for managing revenue deductions with 1C:Company Management software

To manage revenue deductions well, businesses can apply smart software such as 1C:Company Management. This is a comprehensive business management solution, connecting every department together, providing a series of useful features. In particular, the software impresses with its financial management capabilities, allowing businesses to control and optimize revenue deductions in particular and other costs in general:

• Cash and bank deposit management : The software allows setting up multi-currency and multiple cash funds, multiple bank accounts to monitor and adjust financial situation.
• Revenue and expenditure planning : The system allows planning revenue and expenditure from time to time, thereby controlling and strictly implementing financial obligations.
• Payment scheduling : The software provides payment schedules based on expected cash receipts and disbursements documents or according to other cash flow plans of the business.
• Debt management : The system records, checks and analyzes debts with suppliers and customers in detail and automatically calculates the principal and interest amounts that need to be paid.
• Track credit contracts : The software tracks details of each credit contract and automatically calculates the amount of principal and interest that needs to be paid by many different methods.

Through the article, 1C Vietnam presented revenue deductions with information on concepts, accounting methods as well as effective implementation principles for businesses. If you have any questions or need to use 1C:Company Management software, please contact 1C Vietnam immediately for support.