Overpayment Of Taxes Due To Cancel/Rebills
Let’s assume a cancel / rebill occurs after a payment is received and the net effect of the cancel / rebill is that the customer has overpaid their taxes.
Event |
GL Accounting |
Tax Payable Balance |
Tax Holding Balance |
Bill segment created |
A/R 110 Revenue <100> Tax Holding <10> |
0 |
(10) |
Payment received |
Cash 110 A/R <110> Tax Holding 10 Tax Payable <10> |
(10) |
0 |
Cancel |
A/R <110> Revenue 100 Tax Holding 10 |
(10) |
10 |
Rebill |
A/R 27.50 Revenue <25> Tax Holding <2.50> |
(10) |
7.50 |
You'll notice that the amount payable to the taxing authority still indicates $10 (the amount of tax that was paid by the customer). However, you'll notice that the tax holding balance is 7.50 (debit). This looks a bit odd, but it's correct. Remember that at this point, the customer has a credit balance of $75 and this will be whittled down as successive bills are produced as shown below. Note: refer to Cash Refunds for an example of what happens if you refund the credit with a check rather than letting it whittle down.
Event |
GL Accounting |
Tax Payable Balance |
Tax Holding Balance |
(10) |
7.50 |
||
Bill segment created |
A/R 55 Revenue <50> Tax Holding <5> |
(10) |
2.50 |
Bill segment created |
A/R 110 Revenue <100> Tax Holding <10> |
(10) |
(7.50) |
In the unlikely event of a payment being received while the tax holding has a debit balance, nothing will be done in respect of transferring funds from holding to payable (there is nothing to transfer).