Accounting – round discounts up or down?

When you raise an invoice and calculate the vat you must round that vat amount down.

Does this still apply when you are calculating a trade discount?

i.e. your net total of 132.10 has a trade discount of 5%
The calculator shows the amount as being 6.605

Do I round the amount down to 6.60 using the vat principle, or round up to 6.61 as the third digit after the decimal is 5 or above?

My textbook specifies to round vat down but does not mention the procedure when doing discounts. Naturally I would either round up or down depending on that third figure being above or below 5…. I was wondering if anybody knows for sure? (This is probably quicker than calling my student support line!)

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3 Responses to “Accounting – round discounts up or down?”

  1. Veritas says:

    We have explicit authority to round down for tax purposes, no doubt because they want to seem generous to us over literally, pence. There is no such ruling over private business transactions, but, it will appear mealy mouthed to customers who will spot that you are rounding down, and will have a much greater detrimental psychological effect on relations, than the benefit of the minor amounts that will accrue to you in extra profit. Round up, whether giving or taking the discount.

  2. lady23 says:

    im an accounting graduate however with your case, i think u should just round it down. although im not so sure if it’s the right thing to do.

  3. Lynda Lou says:

    I would round down as you are giving the discount but if you were taking discount, I would then round up – there are no hard and fast rules as far as I know.

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