Module 3 · Core · 9 min read

Paying suppliers: vouchers, discounts and advances

You will be able to: Record a supplier payment and understand oldest-first allocation; Explain how a settlement discount and a VAT discount are posted; Record an advance paid and apply it to an invoice; Know that a post-dated cheque credits PDC Payable first.

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Paying a supplier is a separate document from the bill. Use Accounting, Payments. The payment voucher matches your money to the supplier's open bills and keeps any extra on account. A voucher is a draft until you press Submit, and a posted voucher is corrected with Amend or reversed with Cancel.

A new Payment Voucher with a supplier picked in Paid To and the list of open bills to settle, oldest first.

Pick the supplier in Paid To and Open Items lists their bills.

Pick the supplier in Paid To and Open Items lists their bills.

The payment voucher

  • Paid To: the supplier. Required.
  • Mode: the payment modes from Settings, Payment Modes (Cash, Bank Transfer, Card, Cheque and so on) plus PDC Cheque. Each mode posts to its own ledger account.
  • Amount: the money actually paid. Required.
  • Open Items and Allocate: leave every Allocate box empty and Zeyto settles the oldest purchase invoices first, by invoice date. Type amounts in boxes to choose bills yourself; the rest stays on account.
  • Reference or Cheque details appear for the modes that need them.

Submit credits the account behind the Mode for the full amount, debits Trade Payables for each bill settled, and debits Supplier Advances for any money left over.

Oldest firstYou owe three bills: PI-101 for AED 1,050, PI-102 for 2,100 and PI-103 for 525, all open. You pay AED 2,000 with Allocate left empty. PI-101 is settled in full (1,050) and PI-102 receives the remaining 950, leaving 1,150 outstanding. PI-103 is untouched. Total owed falls from 3,675 to 1,675. The entry is debit Trade Payables 2,000, credit Bank 2,000.

Discounts from the supplier

Discount Received lets you record a discount the supplier gives for paying early. With the default Settlement discount, VAT unchanged option, it is simply income and the VAT return does not move. Example: a bill of 2,100, you pay 2,000 and take 100 discount. The bill is cleared: debit Payables 2,100, credit Bank 2,000, credit Discount Received 100.

The Advances screen with tiles for customer advances, supplier advances and net, and tabs for Received (Customer) and Paid (Supplier).

Accounting, Advances: money received before an invoice or paid before a bill.

Accounting, Advances: money received before an invoice or paid before a bill.

The other two options change VAT. Before tax means the discount is on the net and VAT is added: a 50 discount at 5% reduces the bill by 52.50, of which 2.50 is taken back from input VAT. After tax means the amount includes VAT: a bill of 1,050 with a 50 discount becomes 1,000 including VAT. In both cases the VAT return drops. Neither can be used in a VAT period that is already filed.

Advances paid

If you prepay a supplier, use Accounting, Advances with Kind set to Advance Paid. Because money has changed hands, the VAT inside the amount is recorded now: VAT is Amount x 5 / 105 at the standard rate. For an advance of AED 2,100, VAT is 100 and the net is 2,000, so the entry is debit Supplier Advances 2,000, debit VAT Input 100, credit Bank 2,100. When the supplier's bill arrives, press Apply advances on the purchase invoice; the VAT already claimed on the advance is taken back so it is counted once.

Watch outChoose the VAT code on an advance from the supplier's own tax invoice for the advance, because the input VAT recorded comes from it.
TipA PDC Cheque payment settles the bills at once but credits PDC Payable until the bank pays the cheque. Module 5 covers clearing and bouncing. A PDC can only be issued in your base currency.

Try it in the demo

  1. Open demo.zeyto.app/demo-app/ and sign in with the public demo user (admin, password demoAdmin123).
  2. Open Accounting, Payments and press + New.
  3. Pick a supplier in Paid To and watch Open Items list its bills, oldest first.
  4. Change Mode to PDC Cheque and see Cheque No and Cheque Date appear.
  5. Open Accounting, Advances and switch Kind between Advance Received and Advance Paid.
Open the live demo

Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.

Key takeaways
  • Leave Allocate empty to settle oldest bills first.
  • A settlement discount is income; a tax discount also reduces input VAT.
  • Advance VAT inside an amount is Amount x 5 / 105 at 5%.
  • Applying an advance takes back the VAT claimed on it.

Check yourself

4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.

1. If you leave every Allocate box empty on a payment voucher, how does Zeyto settle the supplier's bills?

2. You owe bills of AED 1,050, 2,100 and 525. You pay AED 2,000 with Allocate left empty. What is still outstanding on the second bill?

3. An advance paid to a supplier is AED 2,100 including 5% VAT. How much VAT is inside it?

4. A Discount Received of AED 50 is entered with the option Before tax at 5% VAT. By how much is the bill reduced?

Previous: Freight, customs and landed costNext: Returning goods and debit notes

Practice questions for this module · Printable study sheet