If an invoice contains a cash discount and taxes, more tax is posted with the invoice than should be, as the cash discount is not taken into account. When payment is made, the system automatically corrects the tax payment: The tax amount for the cash discount is credited to the input tax account.

The input tax account is debited with $15 when the invoice is posted. However, only $95 (100 - 5%) is to be taxed. Therefore, the tax to be paid is 15% of $95 = $14.25. The difference of $0.75 is credited to the input tax account when the invoice is paid.