less priority accounting

Input VAT

VAT paid by a business on its purchases (classified as an Asset/Receivable until recovered)

Output VAT

VAT charged by a business on its sales (classified as a Liability owed to tax authorities)

VAT-Inclusive to Exclusive Formula

Inclusive Amount × (100 / (100 + VAT Rate%))

Perpetual Inventory System

Inventory and Cost of Sales are updated continuously with every individual sale and purchase transaction

Periodic Inventory System

Inventory is determined only at the end of the period by physical count; Cost of Sales is calculated as Opening Inventory + Purchases - Closing Inventory

Trade Discount

A reduction from the list price given by a seller to a buyer (not recorded separately in the ledger, transactions are recorded at the net discounted price)

Cash Discount (Settlement Discount)

A reduction given for prompt payment within a specified credit term (recorded using a Discount Allowed or Discount Received account)

Relevance (Qualitative Characteristic)

Financial information must be capable of making a difference in the decisions made by users

Faithful Representation (Qualitative Characteristic)

Financial information must faithfully represent the economic phenomena it purports to portray (complete, neutral, and free from error)

Comparability

Information allows users to identify and understand similarities and differences among items

Verifiability

Different knowledgeable and independent observers can reach consensus that a depiction is a faithful representation