sometimes vendors whom we owe money to offer us terms terms in this case really means an early
paid discount that's listed on the vendors bill we already learned when it comes to an early paid
discount that the reason they give it to us his vendors are pushing us to pay them faster for
the unpaid bills that we owe them this idea is very similar to what we learned when we learned
about customer discounts and giving customers the early paid discount terms means the conditions for
receiving an early pay discount the discount date is the last day that we can pay and receive the
discount for example if the terms listed on the bill from the vendor are written this way it reads
2/10 net 30 that means there will be a 2 percent discount if we pay within 10 days of the date of
the sale or at least the date of the service that was provided from the vendor a second example
reads 315 net 45 if those are the terms that means we would get a 3% discount if we paid within 15
days of the sale for example let's imagine that the date the service the vendor provided was
February 14th let's imagine the terms on the bill that the vendor sent us was for 10 net 30 that
means that the discount date would be February 24th because that's 10 days after the date of
the service the due date which is the final date that we have to pay will be March 12 because March
12 is 30 days after February 14th remember most years February only has 28 days there are three
steps to setting up an early pay discount first we have to put a discount account in the chart of
counts if we want to track the total money that all vendors have given us for discounts number two
we have to put the terms that they are offering us on the terms list so that we can utilize these
terms when we enter a bill and number three if we have permanent agreement with vendors for the
different terms then we should put the permanent terms in the permanent vendor information in the
vendor Center please note vendor early paid discounts are slightly different than customer
early paid discounts number one sometimes instead of a special discount account we just reduce the
expense or asset from the bill that means if we have an expense for a thousand dollars and then we
pay with an early paid discount that expense will decrease by the amount of the discount instead of
putting the discount in a special account to track it number two the terms list in QuickBooks is the
same for both customers and vendors so when we get to QuickBooks you'll notice that the terms
list or this is the same in addition to the term that we already added to the terms list and the
enter bills window is a little bit different than the create invoice window for customers
it allows adjustment of the due date right there on the bill and that's something that the open
invoice or the create invoice window did not do so let's take a look when we click vendor
enter bill we get the enter bill window now by default the due date between the due date will
automatically be calculated as ten days after the date of the bill that's the way it is if
you do not choose special terms for example if I make this March 26th and push tab April 5th
is exactly 10 days after March 26 even if I make this May 30th you can and I push tab you can see
that June 9th is exactly 10 days after May 30th let's go back and put today's date st. Patty's
Day and when I choose terms you'll notice the due date changes for example if I choose terms net 15
the due date becomes 15 days after today's date the date of the bill if I put net 60 you can see
the due date becomes 60 days after the date of the bill this is great now if we try one of the terms
over here one to ten net thirty what happens o to ten net thirty means that the discount date
is ten days after the bill date and QuickBooks calculates that as March 27th and net 30 means
the final due date is 30 days after the date of the bill if we leave these terms and change the
date up here for example we make it April 1 and we push tab well if the bill date is April 1 and
the terms are 2/10 net 30 QuickBooks automatically calculates the discount date as 10 days after the
date of the bill and it automatically calculates the due date as 30 days after the date of the bill
when we studied early pay discount for customers we already put special terms on the terms list
remember 315 net 40 was called good customers so when you look at your terms list and you see good
customers just remember these are the terms and the great thing is that we are able to use the
same terms on the terms list for customers that are already set up if one of the vendors offers
us those very same terms let's go ahead and put each vendors terms in the vendor center let's
make con Edison one 10 net 30 let's make Verizon 210 net dirty and let's utilize our good customer
terms because UPS is giving us these terms that are already on our list from the main menu click
vendor vendor Center and of course we have all the permanent information here in the vendor Center
that we've seen many times in this course let's double click con Edison and give them the terms
that they agreed to payment settings once again we're in the Edit vendor tab edit vendor window
the payment settings tab payment terms here is the terms list and it's the same terms list that
we use for customers as well put on 1 10 net 30 and click OK who else well Verizon gives us two
ten net thirty so we'll double click Verizon will the Edit vendor window opens and we click payment
settings payment terms two ten net thirty then we click OK and of course UPS is giving us our
good customer Terms 315 net forty because we are a good customer of UPS double click
payment settings payment terms good customer click OK our first sample transaction reads
May fourteenth receive the electric bill from con Edison a thousand dollars number eight four seven
two now we will use the con IDI default terms to enter this from the main menu click vendor
enter bill and of course we already know how to enter a bill this is May fourteenth as soon
as we choose con Edison notice not only electric expense comes up but con edison x' default terms
automatically comes up and therefore the discount date and bill date are automatically calculated
the reference number is eight four seven two and the amount is a thousand dollars when we
push tab it puts it in both places in the bill window and that's how you would record the bill
save and close May fifteenth paid-in-full the electric bill that we just entered for con Edison
if we pay it the very next day then we know we're entitled to the discount you should note however
we will not have a separate account to track the total vendor discounts instead the discounts will
simply decrease the expense that relates to the bill we know a bill from con Edison is always
electric expense so that will be the account that we choose for our discount account from the main
menu click vendors pay bills of course we choose con Edison and of course we choose May 15th now
notice this is the only bill that has a discount date when we click on it to select it we can see
the terms here in order to be able to click set discount we have to click the check box in the
margin which tells QuickBooks were paying the entire amount that's the only way we will get
the early paid discount once we check the box to tell QuickBooks we're paying then we click set
discount now notice QuickBooks knows the amount of the bill knows the amount of the discount and
knows the amount to pay of course we do not have a separate account to track the vendors discounts
some companies might but most companies simply reduce the expense that relates to that bill so
we will choose electric expense only because this particular bill was for electric expense you must
make sure you know what expense or what asset was listed on the bill in order to reduce that expense
or that asset when you choose it in the discount window when we click done you can see that we
are only paying 990 and cash and bank will only decrease by 90 electric expense will decrease by
the $10 and the entire thousand dollars will be removed from the from the balance of con Edison
pay selected bill we're up to check number 2:18 click OK and then click done how can we check
the results well when we look at the trial balance and we double click the cash and bank account at
the very bottom the last transaction was checked number 218 for only $990 because we received a
$10 discount when we find electric expense and we double click electric expense we can see at the
bottom there is a credit there is a decrease to electric expense for the $10 discount so electric
expense increased by the thousand dollars of the bill but when we found out later we were
getting a $10 discount from that electric bill we decrease our electric expense by 10 dollars