I have this below query about :
Concept of terms of payments.
Please share your valuable thoughts on it.
Thanks in advance.
Terms of payment are the conditions agreed between business partners for payment of invoices. The conditions define the due date and the cash discount offered for payment of the invoice within a certain payment. In order to define terms of payment the system uses following data : baseline date, cash discount period, cash discount percentage rates or fixed amount.
You have option of also defining payment terms with day limit and as per the installment terms. To use the terms of payment for a specific vendor you need to assign the terms of payment key in the master data of the particular vendor. For terms of payment configuration it is necessary to define with what procedure the terms of payment would be used into the system.
There are two types of procedure "net procedure which is cash discount provided with taxes not included" another is "gross procedure which is cash discount provided with inclusive of taxes". The two types of procedures need different GL accounts, with net procedure we need to define "cash discount clearing account and cash discount loss account" while for the gross procedure we need to define "cash discount revenue account and cash discount expense account" The paths for the terms of payment and defining accounts are: Financial accounting new----accounts receivable and accounts payable---business transactions--incoming invoices/credit memos--maintain terms of payment, define installment terms of payment, define procedure, define accounts for net procedure.
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