Example of Creating a Rebate Accrual Adjustment
This example details how to define a volume rebate for customer 4183 and item CLRD100. To do so, you must:
Define the rebate adjustment to accrue rebate information to the general ledger.
Define the factor as 4 percent to indicate that the system accrues 4 percent of each order detail line to the general ledger.
Define rebate thresholds.
The rebate is paid at 2 percent over 100,000 and 3 percent over 200,000. The currency is USD. The rebate is effective from June 20 through December 31 of this year.
On June 30, you enter an order for customer 4183 and item CLRD100 for 50,000.
During sales update, the system updates sales volume history with sales quantity and amount information. The system compares sales totals with rebate thresholds to determine whether the system should calculate a rebate amount. The system also creates journal entries in the general ledger to recognize the potential rebate liability.
In this example, the order total is less than the first rebate threshold, so the system does not calculate a rebate amount. The system updates volume history with this information:
Order history total = 50,000.
Rebate amount = 0.
The system creates journal entries with an I batch type to record the sale of goods:
Debit accounts receivable = 50,000.
Credit sales = 50,000.
The system creates journal entries to recognize the rebate liability (4 percent of the order amount):
Debit accrual discount (4 percent × 50,000) = 2,000.
Credit rebate payable = 2,000.
You define automatic accounting instruction (AAI) 4280 for the amount to accumulate in the volume history rebate account.
Enter additional orders for customer 4183 and item CLRD100 using this information:
July 15 for 100,000.
July 30 for 100,000.
During sales update, the system updates volume history as follows:
Order history total = 250,000.
Rebate amount = 7,500.
When the customer's order history reaches the second rebate threshold, the system calculates the rebate amount at 3 percent of the order history total (250,000 × 0.03 = 7,500.00).
To create the journal entries, the system uses the 4 percent from the accrual adjustment. During sales update, the system creates journal entries for these two orders:
Debit accounts receivable = 200,000.
Credit sales = 200,000.
Debit accrual discount = 8,000.
Credit rebate payable 8,000.
On August 1, you generate credit orders. Although the system has made general ledger entries, you must submit a credit note before the system issues a credit order. The system bases the credit orders on credit notes you submit. To use the correct AAI, the system reads the general ledger class code for the credit order in the adjustment. It uses the beneficiary from the adjustment as the sold to address.
Next, you run the Sales Update program to create these general ledger entries for the credit order:
Debit revenue = 7,500.
Credit accounts receivable = 7,500.
If you define rebate thresholds to reset the rebate amount field, the system updates the Volume History file as follows:
Rebate amount = 0.
Rebate paid = 7,500.