Understanding Tracking Taxes

To certify compliance with governmental regulations, it is a common business requirement to track and reconcile invoice and voucher tax amounts to revenue and expense accounts by tax rate/area or by pay item and tax information (tax rate area, tax explanation code and tax item number).

The JD Edwards EnterpriseOne General Ledger system provides you with functionality to validate the relationship between invoice and voucher tax information and general ledger revenue and expense accounts. Depending on the program or process you are using, you may manually enter the GL distribution for a voucher or invoice or the system may automatically add entries to the general ledger. When the system automatically creates entries to the general ledger, the system also automatically captures pay item and tax information on general ledger for revenue and expense accounts.

Note: For system-generated journal entries, such as those generated from the distribution AAIs, the system automatically selects the Track Taxes field to 1 if the account is taxable.

When you manually enter the GL distribution for a voucher or invoice, the system captures tax information by general ledger account using one of the following two methods:

• Track taxes by tax rate/area

  If you use this method, you capture G/L Distribution based on and tax information (tax rate area, tax explanation code) only; you are not required to enter G/L distribution by pay item. Therefore, there is no direct relationship between the taxable pay items and individual G/L distribution lines. After you post transactions, run the Tax Reconciliation Repository program (R0018R) to allocate tax amounts from the F0911 table to the Tax Reconciliation Repository table (F0018R) by pay item. The results of this process are approximate because the system relies on an allocation.

• Track taxes by pay item and G/L account

  If you use this method, you are required to enter the G/L distribution by pay item and account. The system captures tax information by pay item and revenue/expense account. The results of this process are exact because you are required to enter complete tax information by pay item in the G/L distribution form. Use this process on a company by company basis.

Note: You can use only one of the tax capture processes for each company, or the system will create unpredictable results. For example, you cannot set the Balance GL Distribution by Pay Item and Tax for company 00001 and also run the Tax Reconciliation Repository program over transactions for company 00001.