This chapter contains the Understanding Tax Explanation Codes topic.
You might be required to calculate, pay, collect, and track taxes on invoices that you receive from suppliers and send to customers. When this is necessary, you need to enter a tax explanation code on the transaction. You can enter the tax explanation code on the transaction entry form, or let the system use a default tax explanation code that you set up on the customer or supplier record.
Tax explanation codes are hard-coded values that exist in the Tax Explanation Codes (00/EX) user-defined codes (UDC) table. These codes specify the algorithm that the system uses to calculate the tax amount and which, if any, GL account is used to record tax information. Each tax explanation code specifies a particular algorithm that affects the amount to distribute in the general ledger. You can create your own tax explanation codes, but if they begin with B, C, E, S, U, or V, they will use the same algorithm and work exactly as the standard tax explanation codes. For example, S1 will function exactly as S and V7 will function exactly as V. If you create tax explanation codes for any other letter or number, the system uses the sales tax algorithm to calculate tax and distribution amounts.
The letter T follows some tax explanation codes. You use this type of tax explanation code when you want to enter only the tax portion of the transaction. For example, if you enter a voucher and do not include the tax information, you can enter another voucher and use the appropriate tax explanation code followed by the letter T to indicate that the entire voucher represents a tax amount.
Not every tax explanation code is applicable to every system in JD Edwards EnterpriseOne software.
These table lists the available tax explanation codes, the systems that use each code, and the gross and GL distribution amounts that the system calculates when the taxable amount is entered:
| Tax Explanation Code | Description | System Used* | Gross and GL Distribution Amounts |
|---|---|---|---|
| S | Seller-assessed sales tax | AP, AR, PO, SO | Gross = Goods + Sales tax Distribution = Goods + Sales tax |
| ST | Same as S, but taxes only | AP, AR | Gross = Sales tax Distribution = Sales tax |
| U | Self-assessed sales tax | AP, PO | Gross = Goods Distribution = Goods + Use tax |
| UT | Same as U, but taxes only | AP | Gross = 0 Distribution = Use tax |
| V | Value-added tax (VAT) | AP, AR, GA, PO, SO | Gross = Goods + VAT Distribution = Goods |
| VT | Same as V, but taxes only | AP, AR, GA | Gross = VAT Distribution = 0 |
| V+ | Same as V, but calculated as tax on a tax | AP, AR, PO, SO | Gross = Goods + VAT Distribution = Goods |
| B | VAT + Use tax | AP, PO | Gross = Goods + VAT Distribution = Goods + Use tax |
| BT | Same as B, but taxes only | AP | Gross = VAT Distribution = Use tax |
| C | VAT + Sales tax | AP, AR, PO, SO | Gross = Goods + VAT + Sales tax Distribution = Goods + Sales tax |
| CT | Same as C, but taxes only | AP, AR | Gross = VAT + Sales tax Distribution = Sales tax |
| E | Tax exempt | AP, AR, PO, SO | Gross = Goods Distribution = Goods |
*AP = JD Edwards EnterpriseOne Accounts Payable
AR = JD Edwards EnterpriseOne Accounts Receivable
GA = JD Edwards EnterpriseOne General Accounting (journal entries)
PO = JD Edwards EnterpriseOne Procurement
SO = JD Edwards EnterpriseOne Sales Order Management
|
Note: Tax explanation code of AR is used by JD Edwards EnterpriseOne Property Management. |
|
See Also: "Tax Explanation Codes" in these books: |
When you enter purchase orders with sales tax (tax explanation code S), the system uses distribution AAIs (automatic accounting instructions) to record the tax and, if you are purchasing for stock, update the inventory account. These AAIs differ depending on whether you are purchasing for stock and whether you use two-way or three-way matching.
These examples display the AAIs that the system uses and the tables and accounts that the system updates when you run the program specified. All of the examples are for a purchase order in the amount of 1,000 USD with a 10 percent sales tax rate. The system was set up to create the journal entries in detail.
When you purchase for stock, you must use three-way voucher matching. When you enter the purchase order receipt, the system records the tax in two general ledger accounts: Purchase Tax Accrual and Received Not Vouchered Tax. When the system creates the voucher, it offsets the Received Not Vouchered Tax account. You use the Purchase Tax Accrual account to track the tax portion of the item. You do not remit sales tax to a tax authority because the seller (supplier) pays it.
Example: Purchasing for Stock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
DM - 4310
DM - 4350 DM - 4320 DM - 4355 |
F0911 | Inventory Asset
Purchase Tax Accrual (asset) Received Not Vouchered Received Not Vouchered Tax |
1,000
100 |
.
. . 1,000 100 |
| Voucher Match (P4314)
Creates a voucher |
.
. DM - 4320 DM - 4355 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered Received Not Vouchered Tax |
.
. . 1,000 100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PC | F0911 | AP Trade | . | 1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
|
Note: When you enter tax information during the voucher match process, instead of when you enter the purchase order, the system does not make an entry to the account associated with DM AAI 4355; instead, the system debits the account for DM AAI 4350, as well as the Received Not Vouchered account, and credits the AP Trade account when the voucher is posted. |
When you purchase for a nonstock item, you can use either two-way or three-way voucher matching. When you use three-way voucher matching and enter the purchase order receipt, the system records the tax in the Received Not Vouchered Tax account, which is offset when the system creates the voucher. The system records the sales tax on the voucher only and includes it in the amount of the expense distribution. The system does not record sales tax in a separate account because you do not remit it to a tax authority; the supplier pays it.
Example: Purchasing for Nonstock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
.
. DM - 4320 DM - 4355 |
F0911 | Expense Account from PO line
Received Not Vouchered Received Not Vouchered Tax |
1,100 | .
. 1,000 100 |
| Voucher Match (P4314)
Creates a voucher |
.
. DM - 4320 DM - 4355 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered Received Not Vouchered Tax |
.
. . 1,000 100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PC | F0911 | AP Trade | . | 1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you use two-way voucher matching, the system does not use the Received Not Vouchered accounts because you do not enter purchase order receipts; you enter the purchase order and create the voucher. The system does not record the sales tax in any general ledger account at any time during the process. The system records the sales tax on the voucher only and includes it in the amount of the expense distribution. The system does not record sales tax in a separate account because you do not remit it to a tax authority; the supplier pays it.
Example: Purchasing for Nonstock Items - Two-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Voucher Match (P4314)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense Account from PO line |
.
. . 1,100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PC | F0911 | AP Trade | . | 1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a sales order with sales tax (tax explanation code S) and run Update Customer Sales (R42800), the system uses distribution AAIs to record the Store Sales, Tax Liability, Cost of Goods (COG) Sold, and Inventory accounts. You offset the Tax Liability account when you pay the tax authority.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you run the specified program. The example is for a sales order in the amount of 1,000 USD with a 10 percent sales tax rate.
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Update Customer Sales (R42800)
Creates an invoice |
.
. DM - 4230 DM - 4250 DM - 4220 DM - 4240 |
F03B11
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Store Sales Tax Liability COG Sold Inventory |
.
. . . . 900 |
.
. . 1,000 100 . 900 |
| Post General Ledger (R09801)
Posts the invoice to the general ledger |
FIN - RC | F0911 | AR Trade | 1,100 | . |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a voucher or invoice with sales tax, the system calculates the tax amount but does not create a separate entry to the general ledger. The sales tax appears only in the voucher or invoice record. For vouchers, the tax is part of the expense, so you do not need to enter the tax in a specific account. For invoices, however, you might want to track the sales tax in a separate account because you must pay it. In this instance, you would need to subtract the sales tax amount from the revenue and enter it separately.
Alternatively, instead of using tax explanation code S, you can use tax explanation code V for the system to record the tax in the account specified by PTxxxx (for payables) or RTxxxx (for receivables), where xxxx is the GL offset that is entered on the tax rate/area.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you enter and post a voucher or invoice. The examples are for a taxable amount of 1,000 USD with a 10 percent sales tax rate.
Example: Voucher Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Voucher Entry (P0411)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense |
.
. . 1,100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PC | F0911 | AP Trade | . | 1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a purchase order with use tax (tax explanation code U), the system calculates the tax amount and makes a separate entry to the general ledger when you post the transaction.
The examples that follow display the AAIs that the system uses and the tables and accounts that the system updates when you run the program specified. All of the examples are for a purchase order in the amount of 1,000 USD with a 10 percent use tax rate. The system was set up to create the journal entries in detail.
When you purchase for stock, you must use three-way voucher matching. When you enter the purchase order receipt, the system records the tax in two general ledger accounts: Purchase Tax Accrual and Received Not Vouchered Tax. When the system creates the voucher, it offsets the Received Not Vouchered Tax account and records the tax in the Purchase Tax Accrual asset account only for tracking purposes. When you post the voucher, the system records the tax in the Use Tax Payable account. When you pay the tax authority, you enter a voucher that offsets the Use Tax Payable account.
Example: Purchasing for Stock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
DM - 4310
DM - 4350 DM - 4320 DM - 4355 |
F0911 | Inventory Asset
Purchase Tax Accrual (asset) Received Not Vouchered Received Not Vouchered Tax |
1,000
100 |
.
. . 1,000 100 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 DM - 4355 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,000) Received Not Vouchered Received Not Vouchered Tax |
.
. . 1,000 100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PT
FIN - PC |
F0911 | Use Tax Payable AP Trade | . | 100
1,000 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you purchase for a nonstock item, you can use either two-way or three-way voucher matching. When you use three-way voucher matching and enter the purchase order receipt, the system records the tax in the Received Not Vouchered Tax account, which is offset when the system creates the voucher. The system does not include the use tax in the gross amount of the voucher, nor does it include it in the amount of the expense distribution. The system records the tax in a separate account that is offset when you remit the tax to the tax authority.
Example: Purchasing for Nonstock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
.
. DM - 4320 DM - 4355 |
F0911 | Expense Account from PO line
Received Not Vouchered Received Not Vouchered Tax |
1,100 | .
. 1,000 100 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 DM - 4355 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,000) Received Not Vouchered Received Not Vouchered Tax |
.
. . 1,000 100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PT FIN - PC | F0911 | Use Tax Payable AP Trade | . | 100
1,000 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you use two-way voucher matching, the system does not use the Received Not Vouchered accounts because you do not enter purchase order receipts; you enter the purchase order and create the voucher. When the system creates the voucher, it does not include the use tax in the gross amount of the voucher, nor does it include it in the amount of the expense distribution. The system records the tax in a separate account that is offset when you remit the tax to the tax authority.
Example: Purchasing for Nonstock Items - Two-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Voucher Match (P4314)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,000) Expense Account from PO line |
.
. . 1,000 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PT
FIN - PC |
F0911 | Use Tax Payable AP Trade | . | 100
1,000 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a voucher with use tax, the system calculates the tax amount and creates a separate entry to the Use Tax Payable account when you post the transaction. You offset this account when you pay the tax authority.
This example displays the AAIs that the system uses and the tables and accounts that the system updates when you enter and post a voucher that has a taxable amount of 1,000 USD with a 10 percent use tax rate.
Example: Voucher Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Voucher Entry (P0411)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,000) Expense |
.
. . 1,100 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PT
FIN - PC |
F0911 | Use Tax Payable AP Trade | . | 100
1,000 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a purchase order with value-added tax (VAT) (tax explanation code V), the system calculates the tax amount and makes a separate entry to the general ledger when you post the transaction.
The examples that follow display the AAIs that the system uses and the tables and accounts that the system updates when you run the program specified. All of the examples are for a purchase order in the amount of 1,000 USD with a 10 percent VAT tax rate. The system was set up to create the journal entries in detail.
When you purchase for stock, you must use three-way voucher matching. When you enter the purchase order receipt, the system does not accrue the tax; tax is recorded in the Received Not Vouchered Tax account only, and then is offset when the system creates the voucher. When you post the voucher, the system records the tax in the VAT recoverable tax account. Rather than pay a tax authority, you pay the seller (supplier) for the amount of the goods plus tax and recover the tax amount from the tax authority later.
Example: Purchasing for Stock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
DM - 4310
DM - 4320 |
F0911 | Inventory Asset
Received Not Vouchered |
1,000 | .
. 1,000 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered |
.
. . 1,000 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable
Tax AP Trade |
100 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you purchase for a nonstock item, you can use either two-way or three-way voucher matching. When you use three-way voucher matching and enter the purchase order receipt, the system records the tax in the Received Not Vouchered Tax account, which is offset when the system creates the voucher. When you post the voucher, the system records the tax in the VAT Recoverable Tax account. Rather than pay a tax authority, you pay the supplier for the amount of the goods plus tax and recover the tax amount from the tax authority later.
Example: Purchasing for Nonstock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
.
. DM - 4320 DM - 4355 |
F0911 | Expense Account from PO line
Received Not Vouchered Received Not Vouchered Tax |
1,000 | .
. 1,000 100 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered |
.
. . 1,000 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable
Tax AP Trade |
100 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you use two-way voucher matching, the system does not use the Received Not Vouchered accounts because you do not enter purchase order receipts; you enter the purchase order and create the voucher. When the system creates the voucher, it includes the VAT tax in the gross amount of the voucher, but not in the expense distribution. When you post the voucher, the system records the tax in the VAT Recoverable tax account. Rather than pay a tax authority, you pay the supplier for the amount of the goods plus tax and recover the tax amount from the tax authority later.
Example: Purchasing for Nonstock Items - Two-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Voucher Match (P4314)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense Account from PO line |
.
. . 1,000 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable
Tax AP Trade |
100 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a sales order with VAT tax (tax explanation code V) and run Update Customer Sales (R42800), the system uses distribution AAIs to record the Cost of Goods (COG) Sold and Inventory accounts. Although the VAT amount appears on the sales update report, the system does not record it in the VAT Payables account until you post the invoice. You offset the VAT Payables account when you pay the tax authority.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you run the specified program. The example is for a sales order in the amount of 1,000 USD with a 10 percent VAT tax rate.
Example: Sales Order to Invoice
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Update Customer Sales (R42800)
Creates an invoice |
.
. . DM - 4230 DM - 4220 DM - 4240 |
F03B11
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Store Sales COG Sold Inventory |
.
. . . 900 |
.
. . 1,000 . 900 |
| Post General Ledger (R09801)
Posts the invoice to the general ledger |
FIN - RTxxxx
FIN - RC |
F0911 | VAT Payables
AR Trade |
.
1,100 |
100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a voucher or invoice with VAT tax, the system calculates the tax amount and creates a separate entry to the general ledger when you post the transaction. In accounts payable, you offset the VAT Recoverable Tax account when you receive payment from the tax authority. In accounts receivable, you offset the VAT Payables account when you pay the tax.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you enter and post a voucher or invoice. The examples are for a taxable amount of 1,000 USD with a 10 percent VAT tax rate.
Example: Voucher Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Voucher Entry (P0411)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense |
.
. . 1,000 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable Tax
AP Trade |
100 | .
1,100 |
Example: Invoice Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Invoice Entry (P03B11)
Creates an invoice |
. | F03B11
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Revenue |
. | .
. . 1,000 |
| Post General Ledger (R09801)
Posts the invoice to the general ledger |
FIN - RTxxxx
FIN - RC |
F0911 | VAT Payables
AR Trade |
.
1,100 |
100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a purchase order using tax explanation code C for VAT + sales tax, the system calculates the tax amount and makes a separate entry to the general ledger for the VAT portion of the tax when you post the transaction.
The examples that follow display the AAIs that the system uses and the tables and accounts that the system updates when you run the program specified. All of the examples are for a purchase order in the amount of 1,000 USD with a 7 percent VAT and 3 percent sales tax rate. The system was set up to create the journal entries in detail.
When you enter the purchase order receipt, the system records the sales tax in two general ledger accounts: Purchase Tax Accrual and Received Not Vouchered Tax. When the system creates the voucher, it offsets the Received Not Vouchered Tax account. You use the Purchase Tax Accrual account to track the sales tax portion of the item. You do not remit sales tax to a tax authority because the seller (supplier) pays it. The gross amount of the voucher includes both the sales and VAT taxes; the GL distribution includes the goods + sales tax only. When you post the voucher, the system records the VAT in the VAT Recoverable Tax account. Rather than pay a tax authority, you pay the seller (supplier) for the amount of the goods plus VAT and recover the VAT amount from the tax authority later.
Example: Purchasing for Stock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
DM - 4310
DM - 4350 DM - 4320 DM - 4355 |
F0911 | Inventory Asset
Purchase Tax Accrual (asset) Received Not Vouchered Received Not Vouchered Tax |
1,000
. . 30 |
.
1,000 . . 30 |
| Voucher Match (P4314)
Creates a voucher |
.
. . . DM - 4320 DM - 4350 DM - 4355 DM - 4350 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered Purchase Tax Accrual (asset) Received Not Vouchered Tax Purchase Tax Accrual (asset) |
.
. . . 1,000 . 30 30 |
.
. . . . 30 |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable Tax
AP Trade |
70 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you purchase for a nonstock item, you can use either two-way or three-way voucher matching. When you use three-way voucher matching and enter the purchase order receipt, the system records the sales tax in the Received Not Vouchered Tax account, which is offset when the system creates the voucher. When the system creates the voucher, it includes both the sales and VAT tax amounts in the gross amount, but only the sales tax in the expense distribution. When you post the voucher, the system records the VAT in the VAT Recoverable Tax account. Rather than pay a tax authority, you pay the supplier for the amount of the goods plus VAT and recover the VAT amount from the tax authority later.
Example: Purchasing for Nonstock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
.
. DM - 4320 DM - 4355 |
F0911 | Expense Account from PO line
Received Not Vouchered Received Not Vouchered Tax |
1,030 | .
. 1,000 30 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 . . . DM - 4355 |
F0411
. . F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Received Not Vouchered Expense Account Received Not Vouchered Tax Expense Account |
.
. . 1,000 . 30 30 |
.
. . . . . 30 |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable Tax
AP Trade |
70 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you use two-way voucher matching, the system does not use the Received Not Vouchered accounts because you do not enter purchase order receipts; you enter the purchase order and create the voucher. When the system creates the voucher, it includes both the sales and VAT tax amounts in the gross amount of the voucher, but only the sales tax in the expense distribution. When you post the voucher, the system records the VAT in the VAT Recoverable Tax account. Rather than pay a tax authority, you pay the supplier for the amount of the goods plus VAT and recover the VAT amount from the tax authority later.
Example: Purchasing for Nonstock Items - Two-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Voucher Match (P4314)
Creates a voucher |
.
. . . DM - 4315* DM - 4315* |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense Account Expense Account |
.
. . 1,000 30 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable Tax
AP Trade |
70 | .
1,100 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a sales order using tax explanation code C for VAT + sales tax and then run Update Customer Sales (R42800), the system uses distribution AAIs to record the Store Sales, Tax Liability, Cost of Goods (COG) Sold, and Inventory accounts. Although the VAT amount appears on the sales update report, the system does not record it in the VAT Payables account until you post the invoice. You offset the VAT Payables account when you pay the tax authority.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you run the specified program. The example is for a sales order in the amount of 1,000 USD with a 7 percent VAT and 3 percent sales tax rate.
Example: Sales Order to Invoice
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Update Customer Sales (R42800)
Creates an invoice |
.
. . . DM - 4230 DM - 4250 DM - 4220 DM - 4240 |
F03B11
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Store Sales Tax Liability COG Sold Inventory |
.
. . . . 900 |
.
. . 1,000 30 . 900 |
| Post General Ledger (R09801)
Posts the invoice to the general ledger |
FIN - RTxxxx
FIN - RC |
F0911 | VAT Payables
AR Trade |
.
1,100 |
70 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a voucher or invoice using tax explanation code C for VAT + sales tax, the system calculates the sales tax amount but does not create a separate entry to the general ledger. For vouchers, the sales tax is part of the expense, so you do not need to enter the tax in a specific account. For invoices, however, you might want to track the sales tax in a separate account because you must pay it. In this instance, you would need to subtract the sales tax amount from the revenue and enter it separately. The system records the VAT amount when you post the transaction. In accounts payable, you offset the VAT Recoverable Tax account when you receive payment from the tax authority. In accounts receivable, you offset the VAT Payables account when you pay the tax.
This example displays the AAI that the system uses and the tables and accounts that the system updates when you enter and post a voucher or invoice. The examples are for a taxable amount of 1,000 USD with a 7 percent VAT and 3 percent sales tax rate.
Example: Voucher Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Voucher Entry (P0411)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Expense |
.
. . 1,030 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PC |
F0911 | VAT Recoverable Tax
AP Trade |
70 | .
1,100 |
Example: Invoice Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Invoice Entry (P03B11)
Creates an invoice |
. | F03B11
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,100) Revenue Sales Tax |
. | .
. . 1,000 30 |
| Post General Ledger (R09801)
Posts the invoice to the general ledger |
FIN - RTxxxx
FIN - RC |
F0911 | VAT Payables
AR Trade |
.
1,100 |
70 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a purchase order using tax explanation code B for VAT + use tax, the system calculates the tax amount and makes two entries to the general ledger when you post the transaction: one for the use portion of the tax and one for the VAT portion of the tax.
The examples that follow display the AAIs that the system uses and the tables and accounts that the system updates when you run the program specified. All of the examples are for a purchase order in the amount of 1,000 USD with a 7 percent VAT and 3 percent use tax rate. The system was set up to create the journal entries in detail.
When you purchase for stock, you must use three-way voucher matching. When you enter the purchase order receipt, the system records the tax in two general ledger accounts: Purchase Tax Accrual and Received Not Vouchered Tax. When the system creates the voucher, it offsets the Received Not Vouchered Tax account and records the tax in the Purchase Tax Accrual asset account only for tracking purposes. When you post the voucher, the system records the tax in the VAT Recoverable Tax and Use Tax Payable accounts. When you pay the tax authority, you enter a voucher that offsets the Use Tax Payable account.
Example: Purchasing for Stock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
DM - 4310
DM - 4350 DM - 4320 DM - 4355 |
F0911 | Inventory Asset
Purchase Tax Accrual (asset) Received Not Vouchered Received Not Vouchered Tax |
1,000
30 |
.
. . 1,000 30 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 DM - 4355 DM - 4350 DM - 4350 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,070) Received Not Vouchered Received Not Vouchered Tax Purchase Tax Accrual (asset) Purchase Tax Accrual (asset) |
.
. . 1,000 30 30 |
.
. . . . . . 30 |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PT FIN - PC |
F0911 | VAT Recoverable Tax
Use Tax Payable AP Trade |
70 | .
30 1,070 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you purchase for a nonstock item, you can use either two-way or three-way voucher matching. When you use three-way voucher matching and enter the purchase order receipt, the system records the tax in the Received Not Vouchered Tax account, which is offset when the system creates the voucher. The system includes the VAT tax only in the gross amount of the voucher (not the use tax), but includes only the use tax in the expense distribution. The system records the tax in a separate account that is offset when you remit the tax to the tax authority.
Example: Purchasing for Nonstock Items - Three-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Enter Receipts by PO (P4312)
Creates a journal entry |
.
DM - 4320 DM - 4355 |
F0911 | Expense Account from PO line
Received Not Vouchered Received Not Vouchered Tax |
1,030 | .
1,000 30 |
| Voucher Match (P4314)
Creates a voucher |
.
. . DM - 4320 DM - 4355 DM - 4350 DM - 4350 |
F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,070) Received Not Vouchered Received Not Vouchered Tax Purchase Tax Accrual (asset) Purchase Tax Accrual (asset) |
.
. . 1,000 30 30 |
.
. . . . . . 30 |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PT FIN - PC |
F0911 | VAT Recoverable Tax
Use Tax Payable AP Trade |
70 | .
30 1,070 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you use two-way voucher matching, the system does not use the Received Not Vouchered accounts because you do not enter purchase order receipts; you enter the purchase order and create the voucher. The system includes the VAT tax only in the gross amount of the voucher (not the use tax), but includes only the use tax in the expense distribution. The system records the tax in a separate account that is offset when you remit the tax to the tax authority.
Example: Purchasing for Nonstock Items - Two-Way Voucher Match
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Voucher Match (P4314)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,070) Expense Account from PO line |
.
. . 1,030 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PTxxxx
FIN - PT FIN - PC |
F0911 | VAT Recoverable Tax
Use Tax Payable AP Trade |
70 | .
30 1,070 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
When you enter a voucher using tax explanation code B for VAT + use tax, the system calculates the use tax amount and includes it in the expense distribution. When you post the voucher, the system creates entries to the:
Use Tax Payable account, which you offset when you pay the tax authority
VAT Recoverable Tax account, which you offset when you receive payment from the tax authority
This example displays the AAI that the system uses and the tables and accounts that the system updates when you enter and post a voucher. The example is for a taxable amount of 1,000 USD with a 7 percent VAT and 3 percent use tax rate.
Example: Voucher Entry
| Program | AAI* | Table | Accounts & Fields Updated | F0911 DR | F0911 CR |
|---|---|---|---|---|---|
| Standard Voucher Entry (P0411)
Creates a voucher |
. | F0411
. F0911 |
Taxable (1,000)
Tax (100) Gross (1,070) Expense |
.
. . 1,030 |
. |
| Post General Ledger (R09801)
Posts the voucher to the general ledger |
FIN - PT
FIN - PTxxxx FIN - PC |
F0911 | Use Tax Payable
VAT Recoverable Tax AP Trade |
.
70 |
30
. 1,070 |
* DM - AAI = Distribution/Manufacturing AAI (F4950); FIN - AAI = Financial AAI (F0012)
|
Note: If you use tax-on-tax calculations, which you specify in the tax rate/area by activating the Compound Tax field, the system uses this formula to calculate the tax amount:(Taxable + VAT) x use tax rate = Tax (1,000 + 70) x .03 = 32.10 |
If you want to make a purchase or sales order line item or a voucher or invoice pay item, tax exempt, you use tax explanation code E. When you use tax explanation code E, the system maintains the tax explanation code and tax rate/area values, but removes the taxable and tax amounts from the voucher or invoice.
You must have the AAI for PT set up to enter tax-exempt purchase orders or vouchers. You must have the AAI for RT set up to enter tax-exempt sales orders or invoices.
If you set the processing option in the General Ledger Post Report program (R09801) to update the Taxes (F0018) table for all tax explanation codes, tax-exempt transactions are excluded.