problem of double-double accounting for expense account

Zhang Weiwu zhangweiwu at realss.com
Mon Jun 8 22:04:07 EDT 2009


Hello. In China we often have this financial difficulty:

Invoices are taxed. To enforce this, tax law requires:

   1. Seller must use invoices printed by tax office on special paper
      and return a copy of issued invoice back to the tax office. It is
      illegal to print your own invoice;
   2. When purchase you must ask for tax-office-printed invoice too,
      only expense covered by such invoices are calculated as expense in
      tax office.

For this system to work, 1 and 2 must be enforced at the same time
because for 2 to work 1 must work. The Chinese government decide to
sometimes enforce 1, sometimes not, depending on a lot of different
situation and reasons, e.g. sometimes they don't want to kill an
industry, like the whole online trading industry; sometimes they think
enforce 1 hurt themselves, sometimes it is too costly to enforce it;

Failure to enforce 1 puts company in difficult situation to enforce 2. A
case can explain it easier: we decide to buy 10 used computers for
clerks. Since they only do data entry there isn't really a need for
fastest computer on the market. However the sales man says he could not
give us an invoice but only a receipt (in case we need to return the
product). If we buy these computer, we could not count it as expense
because we don't have proof of expense (invoice).

The solution? Next time when I buy my furniture for my new household I
say to IKEA I buy it for the company, and they issue a taxed invoice for
the company instead of person. I give the invoice to the company; the
company reports to tax office the company bought new furniture instead
of used computers. This solution is good because my personnel expense
does not need invoice (personal tax is taxed very differently than
company tax, not following 1 and 2).

This solution is not a invention because every small company does so
here, there are few small companies who only purchase from those who can
issue an invoice (e.g. most purchase on ebay does not issue invoice).
The companies use two copy of account file, one record the real expense
the other record the expense that can be proved by invoices. In the end
of each accounting period they check if they can balance the two
expense, e.g. check if the furniture I buy for my household is the same
amount of money company buys the used computers.

My question is if there a way to do it easier in GNU Cash, to check the
difference of expense and to save the work of entering transactions 2
times into two different account files and maintain changes to them.

I know the tax system itself is not optimal but since I could not change
my government (no citizen here could do so without a big change to the
society). I like most others try to live with it. Strictly speaking this
double-double accounting breaks the tax law even if you did not pay a
penny less for tax. I also wonder what would you do in this case,
especially in countries where you don't have control on how government
spends your tax.


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