How does a Purchase formula work?
Default Purchase formula:
The basic formula is Invoice Amount = A+B+C
A = Gross Amount(+)
B = Cash discount(-)
C = Tax(+)
How does Default Formula work?
Let us see how the default formula works with a simple example.
In the above example, for a cash discount of 10% and tax 5%, the default purchase formula works as follows.
Tax calculation based on Basic amount and Cash discount - [Default Formula]
A sample purchase with the Default formula is shown in the below image.
Configuring a new Purchase formula
By default, the tax amount is calculated based on (basic amount + Cash discount). To apply the tax only for the Basic amount, you have to configure a new purchase formula.
Tax calculation based on Basic Amount only - [New Formula Configured]
This is how the new purchase formula works after configuration.
A sample purchase with the above formula is shown in the below image.
The basic formula is Invoice Amount = A+B+C
A = Gross Amount(+)
B = Cash discount(-)
C = Tax(+)
Invoice amount= (Gross amount) + (-Cash discount) + (Tax) |
How does Default Formula work?
Let us see how the default formula works with a simple example.
Item Name |
Qty |
Purchase Price |
Amount(Qty * purchase price) |
X |
1 |
1000 |
1000 |
Gross Amount(Basic) |
1000 |
In the above example, for a cash discount of 10% and tax 5%, the default purchase formula works as follows.
Tax calculation based on Basic amount and Cash discount - [Default Formula]
Caption |
Add/Sub |
Formula Calculation |
Result |
Cash Discount |
- |
Basic Amount |
1000-100 = 900 |
Tax |
+ |
Basic Amount + Cash Discount |
1000+(-100)= 900 Tax 5% =45 |
Invoice Amount |
945 |
A sample purchase with the Default formula is shown in the below image.
Configuring a new Purchase formula
By default, the tax amount is calculated based on (basic amount + Cash discount). To apply the tax only for the Basic amount, you have to configure a new purchase formula.
Tax calculation based on Basic Amount only - [New Formula Configured]
This is how the new purchase formula works after configuration.
Caption |
Add/Sub |
Formula Calculation |
Result |
Cash Discount |
- |
Basic Amount |
1000-100 = 900 |
Tax |
+ |
Basic Amount |
Tax 5% of 1000 =50 |
Invoice Amount |
950 |
A sample purchase with the above formula is shown in the below image.
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