Distribution Code Controls Cash Accounting For A GL Account
Note:
If you do not understand the significance of distribution codes, please refer to Setting Up Distribution Codes.
Whether or not cash accounting is used for a specific GL account is defined on HOLDING GL account's distribution code (i.e., the holding GL account references the true payable account).
It is very important that unique payable and holding distribution codes be used for each type of tax subject to cash accounting rules. For example, if you have cash accounting requirements for both value-added tax (VAT) and a climate levy, you would need four distribution codes:
- VAT Payable.
- VAT Holding.
- Climate Levy Payable.
- Climate Levy Holding.
Without unique distribution codes for each payable and holding account, the system cannot keep track of how much of a given tax is being held, awaiting payment.