How to balance an account?

[Mike or Penny Novack]

>Here is a typical transaction:
>
>2013-03-14 Amazon.com                                      15.91
>           Hang On To Your Kids Expenses: Books            15.91
>                                Liabilities:American Express     14.87
>                                Liabilities:EndUseTax             1.04
>
>Note 1: The amount on the American Express line is what Amazon actually
>charged me for the book, including shipping, and notified American
>Express about it. I pay that at the end of the month.
>
>Note 2: The amount of the EndUseTax line is the amount that is due the
>State of New Jersey for the purchase of that book. I have to pay this
>tax with my state income tax.
>  
>
OK, I hope now my first question will make more sense. My second 
question might not apply to NJ at all. That was a question that depended 
on jurisdiction and my state is different than yours. At least you won't 
have THAT complication.

Now let's look at your transaction because it is clearly wrong. You 
didn't pay Amazon 15.91 because they didn't collect the NJ sales tax (if 
they DID collect the tax then there wasn't an unpaid liability to NJ, 
you don't pay sales tax twice! The debits and credits should have been:

debits:
Expenses: Books 15.91 (memo line might say what book)

credits:
Liabilities: Amex  14.87  (here you might include on the memo line that 
was paid to Amazon)
Liabilities: NJ end use tax 1.04

This is reasonable as you would have included the sales tax as part of 
the cost of the book had you bought it from a brick and mortar books 
store in NJ or from an on line dealer located in NJ who would probably 
have collected the tax.  You would no more have an expense account 
"Amazon" unless you had expenses with Amazon (say overhead fees) than 
you would for the supermarket where you buy food (you put that expense 
under "food", not the name of the store except perhaps in the memo line).

So if at the end of the year you learn that spread out over all your 
purchases that had "end use" as part of the expense there was a bit too 
much (or a bit too little). I'd credit (too much) or debit (too little) 
your miscellaneous expense account for that since you can't attribute it 
to a specific item. But if you don't have a miscellaneous for this sort 
of adjustment you could just pick at random any of the expense accounts 
where there was an item where the use tax component of its cost was more 
than the adjustment amount. In other words, in the end THIS book didn't 
cost 1.04 more than Amazon charged but just 0.56 more than Amazon charged.

Michael