Before starting these procedures, please read the document titled “STATEMENT DISCOUNTS”, as the statement discounts must be setup first.

The following parameters allow the statement discounts to calculate a credit for the sales tax and allow the discounts to be accrued. Go to:

Order Processing (Module 6)
- System Management Functions (Task 32)
  - Modify Parameter Files (Sib-task 22)
    - Posting & Label Options (Option 4)

Look for the following parameters:

SET’STM’DISCOUNTS=

STM'CREDIT'TAX=

STM’DSC’EXP’PREFIX=

STM’DSC’ALW’PREFIX=

STM’DSC’TAX’PREFIX=

The parameters work as follows:

SET'STM'DISCOUNTS=

If A/R has statement discounts allowed based on Order Processing contract item records (found in Module 6, Task 21) then this parameter decides whether they are set during Order Processing posting as available discounts which will then be generally available throughout A/R. Set this parameter to Y
If not then the discounts will be calculated when statements are generated. This is sometimes referred to as 'End-of-Month discounts'. If these discounts will be given as Credit Memo's, rather than as prompt payment discounts, then this option should be set to "N".
NOTE: Also see the A/R aging & statement parameters.

STM'CREDIT'TAX= ;

Should a tax credit be calculated on discount dollars? (Y/N)

Y-yes, calculate tax credit
N-no tax credit.

STM'DSC'EXP'PREFIX=

Prefix for discount expense account to debit if the end-of-the-month discount is to be accrued during posting. i.e. 415

STM'DSC'ALW'PREFIX=

Prefix for discount allowance account to credit if the end-of-the-month discount is to be accrued during posting. i.e. 11597

NOTE: For both STM'DSC'EXP'PREFIX and STM'DSC'ALW'PREFIX parameters, the value will be overlaid on top of the original item revenue account number.

i.e. a 3 digit parameter would then keep the remaining 4 digits of the revenue account (keeping middle digits, possibly a department etc, and the ending division).
i.e. a 5 digit parameter would then keep only the last 2 digits of the revenue account ... the selling division for that line item.

STM'DSC'TAX'PREFIX=

Prefix for the tax account debit.

Leave this parameter blank if the tax is NOT TO BE accrued.
Use 5 characters to allow use of sales order division i.e. 21697
Use 7 characters to force a specific division. i.e. 2169701

***NOTE: These three parameters STM’DSC’EXP’PREFIX, STM’DSC’ALW’PREFIX, STM’DSC’TAX’PREFIX, have to be used together. They won’t work unless all three have G/L account numbers.

Explanation and example of how the parameters work:

When the sales orders in the Holding File (Task 2 in O/E) are posted to A/R, the invoices/sales go into Sales Entry & Editing (Task 1 in the A/R module). The debit side of the transaction is always the A/R account, which comes from the “Setup Automatic Interface” (4/x/32/5) in the G/L module. The debit side of the transaction isn’t shown on the edit list or posting register of Sales Entry & Editing. The credit side of an invoice may be distributed to many different G/L accounts.

In the example, the invoice total is $107.00: $100.00 in sales and $7.00 in sales tax. The G/L entry for the example would be:

Account Name G/L # Debit Credit

AR – Open 105-97-01 107.00

Large Format B & W 400-16-01 70.00

Equipment & Supplies 400-49-01 30.00

Sales Tax 216-97-01 7.00

SCENARIO #1:

The customer gets a 10% statement discount. By setting the parameters, as indicated below, it will cause extra G/L distributions to be created.

STM'CREDIT'TAX=Y This parameter determines if the discount is calculated on the sales tax. When it is set to Y, the discount on the sales tax is calculated. STM’DSC’TAX’PREFIX=21697 This parameter is used to determine which GL account is used for the credit. Note: The G/L account # can be your normal account # for sales tax.

STM’DSC’EXP’PREFIX=415 This parameter is used to determine which GL account is used for the debit to the discount expense account if it’s accrued during posting

STM’DSC’ALW’PREFIX=11597 This parameter is used to determine which GL accounts is used for the credit to the discount allowance account it it’s accrued during posting.

Account Name G/L # Debit Credit

AR – Open 105-97-01 107.00

Large Format B & W 400-16-01 70.00

Equipment & Supplies 400-49-01 30.00

Allow. for Cust. Discount 115-97-01 10.70

Sales Tax 216-97-01 6.30

Sales – Discount 415-16-01 7.00

Sales - Discount 415-49-01 3.00

The G/L from parameter: STM’DSC’ALW’PREFIX will be 10% for the entire invoice.

The 400-xx-xx G/L sales accounts will be reduced by the 415 Sales Discounts accounts (from the parameter: STM’DSC’EXP’PREFIX) on the income statement

The Sales tax amount of $7.00 was reduced by the 10% statement discount to bring it to $6.30.

At month-end the A/R Open report (Task #18 A/R), the total of the discounts column should equal the monthly total for account #115-97-01 in G/L. Account 115-97-01 will be included in the balance sheet.

When the customer pays and takes the discount, the Cash and discount G/L account numbers are debited and the A/R-G/L account number is credited. These G/L account numbers come from the automatic interface in the G/L module.

Account Name G/L # Debit Credit

Cash in Checking 103-97-01 96.30

Allow. for Cust. Discounts 115-97-01 10.70

A/R Open 105-97-01 107.00

If the same discount G/L account number is used for the automatic interface and the parameter: STM’DSC’ALW’PREFIX, then in the example above where this account number is 115-97, it was credited when the customer paid the invoice and the same 115-97 was debited when they took the discount.

Note: The total of this account, for the example: 115-97-01, after posting the A/R interface, should always be the discounts the customers are allowed, but have not yet taken.

SCENARIO #2:

When the parameter: STM’CREDIT’TAX= is Y(es) and the other three parameters are blank.

STM’CREDIT’TAX=Y

STM’DSC’EXP’PREFIX=

STM’DSC’ALW’PREFIX=

STM’DSC’TAX’PREFIX=

If the parameters are set like this, the distribution will be the same as any other sale – see example below:

Account Name G/L # Debit Credit

A/R Open 105-97-01 107.00

Large Format B&W 400-16-01 70.00

Equipment & Sales 400-49-01 30.00

Sales Tax 216-97-01 7.00

When the discount is calculated the amount of the sales tax will be included in the calculations. So the discount will be $10.70.
The taxable sale on the reports is going to be $100.00, with the sales tax of $7.00.
When the original invoice is processed, the $10.70 will go to the G/L account # for sales tax. When the customer pays the invoice, the $10.70 will go to the G/L account # for discounts -- not Sales Tax.
If STM’CREDIT’TAX=N, the calculated discount will be 10.00.

SCENARIO #3:

When the parameter: STM’CREDIT’TAX is N(o) and the other three parameters are set with G/L numbers.

STM'CREDIT'TAX=N

STM’DSC’EXP’PREFIX=415

STM’DSC’ALW’PREFIX=11597

STM’DSC’TAX’PREFIX=21697

If the parameters are set like this and the customer gets a 10% statement discount, the G/L account distribution would be:

Account Name G/L # Debit Credit

A/R Open 105-97-01 107.00

Large Format B&W 400-16-01 70.00

Equipment & Supplies 400-49-01 30.00

Sales-Discount 415-16-01 7.00

Sales-Discount 415-49-01 3.00

Allow for Cust Discount 115-97-01 10.00

Sales Tax 216-97-01 7.00

The difference between Scenario 1 and Scenario 3 is the sales tax isn’t included in calculating the discount and the sales tax isn’t reduced by the 10%.

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This is an example of how an End of Month Statement discount is calculated. This example includes how discounts can also be given on sales tax (for the example, 2 Tax Zones will be used). The customer will get a 10% End-of-the-Month discount on all items.

The statement discounts, setup in the Customer Contract Item File (Task 21 in the Order Processing module), are for line items, not whole order/invoice discounts.

Example: Invoice #295369 has two line items:
- 250-4 and 403-6 each with a quantity of 16.
- The customer has 2 tax zones, one for 6.1% and the other for 2%.

Item 250-4: Line item each price $1.49

$1.49 x 10% = $0.15 discount x quantity of 16 = $2.40 discount on item

Line item discount $2.40 x 6.1% Tax Zone = $0.15 discount on tax

Line item discount $2.40 x 2% Zone tax = $0.05 discount on tax

$2.60 total discount for this item

Item 403-6: Line item each price $2.75

$2.75 x 10% = $0.28 discount x quantity of 16 = $4.48 discount on item

Line item discount $4.48 x 6.1% Tax Zone = $0.28 discount on tax

Line item discount $4.48 x 2% Tax Zone = $0.09 discount on tax

$4.85 total discount for this item

Item 250-4 discount $2.60

Item 403-6 discount $4.85

$7.45 total End-of-the-Month Statement Discount

* There could be a rounding difference of a penny or two.

Statement Discounts - Credit Sales Tax and Accrue Discounts

Sales - Discount 415-49-01 3.00

The difference between Scenario 1 and Scenario 3 is the sales tax isn’t included in calculating the discount and the sales tax isn’t reduced by the 10%.