Invoice Discount Calculator
Usually during sales, the merchant can reduce the selling price by a percentage called a discount.
Discount Calculator
This calculator allows you to calculate the net amount from the gross and calculate the gross from the net.
Simply fill in only two fields in this form to find the other values. If you fill in more than two fields, only the first two will be considered.
Types of Discounts
There are two types of discounts: commercial discounts (rebate, discount, allowance) and financial discounts (cash discount). Here is a brief overview of their definitions:
- Rebate
- Discount granted for loyal customers or bulk purchases.
- Discount
- Reduction granted when goods do not conform to standards or purchase orders.
- Allowance
- Periodic reduction on the total amount of purchases for a period (quarter, semester, etc.).
- Cash Discount
- Discount granted to customers who pay in cash or before the due date.
From an accounting perspective, in an invoice, when we subtract the commercial discount, we get a "commercial net," and when we subtract the cash discount, we get a "financial net."
Discounts should be calculated on amounts excluding taxes (VAT). To learn more about VAT or to calculate it, you can visit this link VAT Calculator.
Discount Calculations
Discounts are calculated cascadingly. If there are multiple discounts in the same invoice, we subtract the first discount from the gross to find the first net. Then we calculate the second discount based on the previous net, not the gross, and so on.
Returning to our calculations... We need to distinguish between:
- Gross: Amount before the discount.
- Net: Amount after the discount.
The discount formula is as follows:
- Discount = Gross * discount rate
- Net = Gross - Discount
Example: Consider a purchase of trousers for $200. Discount 30% (discount granted due to a quality defect).
- Discount = $200 * 0.3 = $60
- Net = $200 - $60 = $140
We can calculate the net from the gross directly using the formula:
- Net = Gross * (1 - discount rate)
We can also calculate the gross from the net directly using the formula:
- Gross = Net / (1 - discount rate)
The 1% Method
Let's take the case of a gross amount of $3000 and a discount rate of 20%. The following table is obtained:
| Elements | Amount | % |
|---|---|---|
| Gross | $3000 | 100% |
| Discount | $600 | 20% |
| Net | $2400 | 80% |
Each amount represents a percentage of the gross amount. The procedure to follow when we have an unknown is as follows:
- Divide the known amount by its percentage to find 1%
- Multiply the amount found by the percentage of the unknown amount
Example 1: Consider the following situation:
| Elements | Amount | % |
|---|---|---|
| Gross | ? | 100% |
| Rebate | ? | 20% |
| Net | $4000 | 80% |
Here, the known amount is Net, representing 80%. Divide it by 80 to find the amount of 1%, i.e., $4000 / 80 = $50. Then, we can find the Gross amount by multiplying this $50 by 100 (giving $5000). Additionally, we can directly find the Rebate by multiplying this $50 by 20 (giving $1000).
Example 2: Consider the following situation:
| Elements | Amount | % |
|---|---|---|
| Gross | ? | 100 |
| Cash Discount | $210 | 7% |
| Net | ? | 93% |
Here, the known amount is the amount of the cash discount, representing 7%. Divide it by 7 to find the amount of 1%, i.e., $210 / 7 = $30. Then, we can find the Gross amount by multiplying this $30 by 100 (giving $3000). Additionally, we can directly find the Net amount by multiplying this $30 by 93 (giving $2910).