Understanding taxes and the income statement

[doncram]

I try to do what Pete needs, but get stuck where I need to create a Tax
table.

In my test company, I created an Income account for Consulting revenues and
a Liability account for Sales Tax Payable.  If I received the $20 in cash I
would want to enter a transaction that would implement the following
journal entry

Cash                                $20
Consulting revenues                     18.69
Sales tax payable                             1.31

When I create a new invoice for a customer that i created, at first I
didn't see how to make any split transaction or otherwise include the sales
tax.  However, I find that a kludgy way that works to add a line for 18.69
amount for Consulting revenues, i.e. 1 unit at cost/unit of $18.69, and add
another line for a unit of Sales Tax Payable at 1.31.  Printing an invoice,
I see that looks unprofessional, as the invoice form allows for taxes to be
included on a separate line below all components of work that the client is
being billed for, but it does present a bill for $20 in total.

It seems like what is needed is to have just one line in the invoice, with
18.69 amount and "Tax included" set to NO, or with 20.00 and with "Tax
included" set to YES.  Then a linked "Tax table", where 7% rate is set
somehow, is supposed to do its magic.  However I don't see how to create a
Tax table;  it does not seem to be included in "Help".

So can anyone advise more specifically how to set up the invoice that Pete
needs?

Don

On Sun, May 21, 2017 at 5:17 AM, Maf. King <maf at chilwell.net> wrote:

> On Sunday, 21 May 2017 00:33:49 BST P M wrote:
> > Very basic problem here.  I made an invoice for a service that I did.  I
> > received $20.  Where I live I have to charge 7% tax.  So the revenue is
> > actually $18.69 and the tax is 1.31.    My invoice has a subtotal of
> $18.69
> > and a tax of 1.31.  I post it and get it paid and for some reason my tax
> > expense is a -1.31.  In other words my net income is boosted by $1.31 as
> > opposed to decreased to $1.31.  Why is this?  Is this because I haven't
> > actually paid the sales tax yet and I close it out later?
> >
>
> Hi,
>
> If your sales tax works anything like VAT does here in the UK, the tax
> you've
> collected isn't an expense to you...  you should record the tax portion
> as a
> liability - it isn't your money, it belongs to the government, you are just
> "looking after it" for them.
>
> HTH,
> Maf.
>
>
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