This chapter contains these topics:
The examples included in this section do not show discounts. To review how the system calculates discounts, see Chapter 11, "Tax Rules by Company".
The examples include the following setup.
Tax explanation codes:
Tax Explanation Code | Description |
---|---|
V | VAT (called GST in Canada) |
VT | Same as V (tax only) |
V+ | Same as V (calculated as a tax on a tax) |
U | Use Tax, Self-Assessed (called PST in Canada) |
UT | Same as U (tax only) |
S | Sales Tax, Seller-Assessed (called PST in Canada) |
ST | Same as S (tax only) |
E | Exempt (product is not taxable) |
B | GST + Self-Assessed PST (not calculated as a tax on a tax when Tax Calculation Method is set to No) |
B | GST + Self-Assessed PST (calculated as a tax on a tax when Tax Calculation Method is set to Yes) |
BT | Same as B (tax only) |
C | GST + Seller-Assessed PST (not calculated as a tax on a tax when Tax Calculation Method is set to No) |
C | GST + Seller-Assessed PST (calculated as a tax on a tax when Tax Calculation Method is set to Yes) |
CT | Same as C (tax only) |
The examples use the following AAI items for taxes:
Sequence Number | Description | Company Bus. Unit | Object | Sub | Item |
---|---|---|---|---|---|
4.060 | Accrued Use / Self Assessment Tax | 1 | 4423 | PT | |
4.060 | Vat Recoverable on Purchase | 1 | 4430 | PTNS40 | |
4.060 | Vat Recoverable on Purchase | 1 | 1240 | PTTXTX | |
4.060 | Vat Recoverable on Purchase | 70 70 | 1240 | PTVATB | |
4.060 | Vat Recoverable on Purchase | 1 | 1240 | A | PTVAT1 |
4.060 | Vat Recoverable on Purchase | 1 | 1240 | B | PTVAT2 |
The examples use three tax rate/areas:
Area1 has a 7% tax and an 8% tax. Tax is not calculated as a tax on a tax and has an effective rate of 15%.
Area2 has a 7% tax and an 8% tax. Tax is calculated as a tax on a tax and has an effective rate of 15.56%.
Area3 has a 7% tax and an 8% tax. 30% of the 7% VAT is not eligible for input credits. Tax is not calculated as a tax on a tax and has an effective rate of 15%. This is the same as Area1, but with a 30% non-recoverable VAT/GST.
B and C Tax Explanation Codes (for Canada). Even though these codes have the same distribution amounts, notice that the system posts them differently. B posts the PST amount to a payables account and C does not. This is because self-assessed PST is not included in the invoice amount for the B tax explanation code and is not paid to the supplier but to the province tax authorities.
Posting Problems. The system posts to the accounts you specified with AAIs. If you encounter posting problems, ensure that your AAIs point to the account you intend. For additional information about AAIs, see Chapter 10, "Automatic Accounting Instructions (AAIs)".
General Ledger Distribution. G/L distribution is the amount to be allocated to general ledger accounts, such as revenue and expense accounts. Generally, the distribution amount is the goods plus sales tax because this is the true cost of purchased goods. VAT is not included in the distribution amount because, typically, a company is reimbursed for VAT paid to suppliers when the company sells those goods.
Discounts. The examples in this chapter do not show discounts. See Chapter 11, "Tax Rules by Company" to review discount examples.
The system posts the transaction above as shown on the report below.
Figure C-5 General Ledger Post - Voucher Entry report
VAT1 = $1000 goods x .07 tax rate = $70
VAT2 = $1000 goods x .08 tax rate = $80
Dr 1000 G/L distribution
Dr 70 VAT1 receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Dr 80 VAT2 receivable account 1.1240.B
This is the account that AAI item PTVAT2 points to.
Cr 1150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1150 = $1000 goods +$70 VAT1 + $80 VAT2
This page shows a journal entry for tax explanation code V.
Figure C-6 Journal Entry for Tax Explanation Code V
The system posts the transaction above as shown on the report below.
Figure C-7 General Ledger Post, General Accounting report
For journal entries, the system posts the entire $150 VAT to the first tax authority in tax rate/area AREA1.
The system posts the transaction above as shown on the report below.
Figure C-9 General Ledger Post - Voucher Entry report
VAT1 =$150 tax x (.07/.15) = $70
VAT2 = $150 tax x (.08/.15) = $80
Dr 0 G/L distribution
Dr 70 VAT receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Dr 80 VAT receivable account 1.1240.B
This is the acount that AAI item PTVAT2 points to.
Cr 150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1070 = $70 VAT1 + $80 VAT2
This page shows a journal entry for tax explanation code VT.
Figure C-10 Journal Entry for Tax Explanation Code VT
The system posts the transaction above as shown on the report below.
Figure C-11 General Ledger Post, General Accounting report
For journal entries, the system posts the entire $150 VAT to the first tax authority in tax rate/area AREA1.
The system posts the transaction above as shown on the report below.
Figure C-13 General Ledger Post - Voucher Entryreport
VAT1 = $1000 goods x .07 tax rate = $70
VAT2 = ($1000 goods + $70 VAT) x . 08 tax rate =$85.60
Dr 1000.00 G/L distribution
Dr 70.00 VAT receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Dr 85.60 VAT receivable account 1.1240.B
This is the account that AAI item PTVAT2 points to.
Cr 1155.60 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1155.60 = $1000 goods +$70 VAT1 + $85.60 VAT2
The system posts the transaction above as shown on the report below.
Figure C-15 General Ledger Post - Voucher Entry report
Use Tax = $1000 goods x .15 tax rate = $150
Dr 150 G/L distribution
$1150 = $1000 goods + $150 use tax
Cr 50 Self-assessed tax payable account 1.4423.AREA1
This is the account that AAI item PT_ _ _ _ points to (business unit and object 1.4423) plus the subsidiary account identifying the tax rate/area (Area1).
Cr 1000 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
The system posts the transaction above as shown on the report below.
Figure C-17 General Ledger Post - Voucher Entry report
Use Tax = $150
Dr 150 G/L distribution
Cr 150 Self-assessed tax payable account 1.4423.AREA1
This is the account that AAI item PT_ _ _ _ points to (business unit and object 1.4423) plus the subsidiary account identifying the tax rate/area (Area1).
The system posts the transaction above as shown on the report below.
Figure C-19 General Ledger Post - Voucher Entry report
Sales Tax = $1000 goods x .15 tax rate = $150
Dr 1150 G/L distribution
$1150 = $1000 goods + $150 sales tax
Cr 1150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1150 = $1000 goods + $150 sales tax
Note:
For sales orders, the system posts to an offset account. The next page shows an example.This page shows the sales order information.
This page shows how the system posts the sales order.
Figure C-23 General Ledger Post - Invoice Entry report
VAT1 = $1000 goods x .07 tax rate = $70
VAT2 = $1000 goods x .08 tax rate = $80
Dr 1150 Accounts receivable account 40.1210
This is the account that AAI item RCxxxx points to.
$1150 = $1000 goods + $70 VAT1 + $80 VAT2
Dr 650 Cost of goods sold
Cr 70 Tax account 10.4550.A
This is the account that AAI table 4250 points to.
Cr 80 Tax account 10.4550.B
This is the account that AAI table 4250 points to.
Cr 1000 G/L distribution (sales account)
Cr 650 Inventory for the cost of the goods sold
The system posts the transaction above as shown on the report below.
Figure C-25 General Ledger Post - Voucher Entry report
Sales Tax = $150
Dr 150 G/L distribution
Cr 150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
The system posts the transaction above as shown on the report below.
Figure C-27 General Ledger Post - Voucher Entry report
Dr 1000 G/L distribution
Cr 1000 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
The system posts the transaction above as shown on the report below.
Figure C-29 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = $1000 goods x .08 tax rate = $80
Dr 1080 G/L distribution
$1080 = $1000 goods + $80 PST
Dr 70 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 80 Self-assessed tax payable account 1.4423.AREA1.
This is the account that AAI item PT_ _ _ _ points to (business unit and object 1.4423) plus the subsidiary account identifying the tax rate/area (Area1).
Cr 1070 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1070 = $1000 goods + $70 GST
The system posts the transaction above as shown on the report below.
Figure C-31 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = ($1000 goods + $70 GST) x .08 tax rate =$85.60
Dr 1085.60 G/L distribution
$1085.60 = $1000 goods + $85.60 PST
Dr 70.00 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 85.60 Self-assessed tax payable account 1.4423.AREA2.
This is the account that AAI item PT_ _ _ _ points to (business unit and object 1.4423) plus the subsidiary account identifying the tax rate/area (Area2).
Cr 1070.00 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1070 = $1000 goods +$70 GST
The system posts the transaction above as shown on the report below.
Figure C-33 General Ledger Post - Voucher Entry report
GST =$150 tax x (.07/.15) = $70
PST = $150 tax x (.08/.15) = $80
Dr 80 G/L distribution
$80 = $80 PST
Dr 70 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 80 Self-assessed tax payable account 1.4423.AREA1.
This is the account that AAI item PT_ _ _ _ points to (business unit and object1.4423) plus the subsidiary account identifying the tax rate/area (Area1).
Cr 70 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
The system posts the transaction above as shown on the report below.
Figure C-35 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = $1000 goods x .08 tax rate = $80
Dr 1080 G/L distribution
$1080 = $1000 goods + $80 PST
Dr 70 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 1150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1150 = $1000 goods + $70 GST + $80 PST
The system posts the transaction above as shown on the report below.
Figure C-37 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = ($1000 goods + $70 GST) x .08 tax rate =$85.60
Dr 1085.60 G/L distribution
$1085.60 = $1000 goods + $85.60 PST
Dr 70.00 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 1155.60 Accounts payable account 1.4110
This is that account that AAI item PCxxxx points to.
$1155.60 = $1000 goods +$70 GST + $85.60 PST
The system posts the transaction above as shown on the report below.
Figure C-39 General Ledger Post - Voucher Entry report
GST =$150 tax x (.07/.15) = $70
PST = $150 tax x (.08/.15) = $80
Dr 80 G/L distribution
$80 = $80 PST
Dr 70 GST receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
$70 =$70 GST
Cr 50 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$150 = $70 GST + $80 PST
Credits for V (VAT)
The system posts the transaction above as shown on the report below.
Figure C-41 General Ledger Post - Voucher Entry report
VAT1 = $1000 goods x .07 tax rate = $70
VAT2 = $1000 goods x .08 tax rate = $80
Non-recoverable = $1000 goods x .15 tax rate x .30 = $45
Recoverable = $70 VAT1 - $45 non-recoverable = $25
Dr 1045 G/L distribution
$1045 = $1000 goods + $45 non-recoverable VAT
Dr 25 VAT receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Dr 80 VAT receivable account 1.1240.B
This is the account that AAI item PTVAT2 points to.
Cr 1150 Accounts payable account 1.14110
This is the account that AAI item PCxxxx points to.
$1150 = $1000 goods + $70 VAT1 +$80 VAT2
Credits for B (GST + Self-Assessed PST)
The system posts the transaction above as shown on the report below.
Figure C-43 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = $1000 goods x .08 tax rate = $80
Non-recoverable = $70 GST x .30 = $21
Recoverable = $70 GST - $21 non-recoverable = $49
Dr 1101 G/L distribution
$1101 = $1000 goods + $80 PST + $21 non-recoverable GST
Dr 49 VAT receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 80 Self-assessed tax payable account 1.4423.AREA3.
This is the account that AAI item PT_ _ _ _ points to (business unit and object
1.4423) plus the subsidiary account identifying the tax rate/area (Area3).
Cr 1070 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1070 = $1000 goods + $70 GST
Credits for C (GST + Seller-Assessed PST)
The system posts the transaction above as shown on the report below.
Figure C-45 General Ledger Post - Voucher Entry report
GST = $1000 goods x .07 tax rate = $70
PST = $1000 goods x .08 tax rate = $80
Non-recoverable = $70 GST x .30 = $21
Recoverable = $70 GST - $21 non-recoverable = $49
Dr 1101 G/L distribution
$1101 = $1000 goods + $80 PST + $21 non-recoverable GST
Dr 49 VAT receivable account 1.1240.A
This is the account that AAI item PTVAT1 points to.
Cr 1150 Accounts payable account 1.4110
This is the account that AAI item PCxxxx points to.
$1150 = $1000 goods + $70 GST + $80 PST