Thursday, June 13, 2019

On a Journal, system consolidates the tax amount of VAT on Purchases & VAT on Sales and posted it to VAT on Purchases Tax account.

a. If the same Tax Code is selected in the journal entry (meaning accounts with VAT on Purchases and VAT on Sales have the same Tax Code, for example, S-GB), system consolidates all tax amounts to VAT on Purchases tax account regardless of the order of the transaction type in the Journal.

b. System still properly records the tax amount in the GST on Purchases and in the GST on Sales tax reports correctly even if it consolidates the tax amounts at VAT on Purchases in the Journal's GL impact page and in the Balance Sheet report.

c. If different Tax Code is selected per line on the journal entry (Set VAT on Purchases account to S-GB and VAT on Sales to S-GB-Sales for example), system shows both Tax Accounts ( VAT on Sales and VAT on Purchases ) on the GL Impact with their corresponding Tax amounts as well as in the Balance Sheet, GST on Purchases and in the GST on Sales tax reports.

*To illustrate:

Let's say a Journal has the following line level details:

Debit Cost of Goods Sold for 100 (in AUD Currency) / VAT Code = S-GB / VAT Rate = 20% / Gross Amount = 120 / Tax Account = VAT on Purchases
Debit Accounts Receivable for 24 (in AUD Currency) / Gross Amount = 24
Credit Sales for 120 (in AUD Currency) / VAT Code = S-GB / VAT Rate = 20% / Gross Amount = 144 / Tax Account = VAT on Sales

>>>Its GL Impact reflects:

Debit Cost of Goods Sold 100
Credit Sales 120
Debit Accounts Receivable 24
Credit VAT on Purchases 4

>>>Balance Sheet reflects VAT on Purchases for $4 only when Subsidiary Context is set to a Subsidiary (similar to what is in the Journal) but if Subsidiary Context is set to Subsidiary (Consolidated), it reflects both VAT on Purchases and VAT on Sales.

>>>GST on Purchases reflects:

VAT on Purchases for $20 ;and
VAT on Sales for -$24

* To separate the VAT-receivable and VAT-payable account on the Journal:

1. Navigate to Setup > Accounting > Tax Codes > New. Create another tax code with similar settings as S-GB tax code but with a different name. Example: S-GB-Sales Save.

2. Edit the Journal to change the Tax Code of the Sales account to S-GB-Sales, for example. Save.

>>>Its GL Impact reflects:

Debit Cost of Goods Sold 100
Credit Sales 120
Debit Accounts Receivable 24
Debit VAT on Purchases 20
Credit VAT on Sales 24

>>>Balance Sheet reflects both VAT on Purchases and VAT on Sales regardless of the Subsidiary Context, whether it is set to a Subsidiary (similar to what is in the Journal) or to Subsidiary (Consolidated).

>>>GST on Purchases reflects:

VAT on Purchases for $20 ;and
VAT on Sales for -$24

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