Supplier Cashback/Reward held on their Account

[Vinz]

Hi there.

A supplier is offering cashback/reward on prepayment, say I prepay the supplier and they top-up by 3% my account, they keep the 3% reward on their account and it obviously can only be used to pay for their services, I cannot actually get that money back.

I started to account for a prepayment, but I’m failing to see how I should account for the 3% extra as a credit.

Or should I create an actual account, transfer the money from my current account, and create the 3% extra and tag it as other income?

Thanks!
Vinz

[QFSteve]

Hello @Vinz

From what you have said.

I would record the prepayment e.g. £100 (depending on if the prepayment is vatable - cash accounting)

When they bill you e.g. £200 invoice)
Add a second line to the invoice as negative £3

£200 - £3 = £197 due (depending on if the 3% is vatable)
Then use the £100 prepayment to pay the invoice leaving £97 due

[Vinz]

Thank you! I will do that.