Understanding Tracking Taxes by Pay Item and G/L Account

To support tax reporting and auditing requirements, use the tax capture by pay item and account functionality to trace every taxable invoice or voucher from the original document to the GL accounts and the tax declaration and vice versa. Depending on the transaction type and the program, the system captures the values from the Pay Item, Tax Rate Area, Tax Explanation Code, and Tax Item Number fields for revenue and expense accounts. Every revenue and expense record in the Account Ledger table (F0911) corresponds to an individual line in the Customer Ledger table (F03B11) or Accounts Payable Ledger table (F0411), and the Taxes table (F0018).

Use the Amount to Distribute by Pay Item and Tax program (P0001300) to distribute the invoice or voucher amount by pay item and tax information to different accounts. You must enable the Balance GL distribution by Pay Item and Tax constant for an invoice or voucher company to enter revenue or expense accounts for each pay item. You set the constant in the Invoice and Voucher Company Tax Constants program (P00218). The system validates that the amounts balance to the invoice or voucher pay item amount.

Where there is a single pay item on an invoice or voucher record, the system populates the pay item and tax information (tax rate area, tax explanation code and tax item number) on each revenue and expense G/L record. Where there are multiple pay items on an invoice and voucher record, you can manually enter the G/L distribution by pay item and tax information.