[GNC] Recording Tax Correctly

Omer Hayat omer.hayat at outlook.com
Sun Aug 16 09:45:58 EDT 2020


@Christopher Lam<mailto:christopher.lck at gmail.com> I'll show this to my accountant.
In the meanwhile, I tried following:
Created a 'TAX' account under 'Liability' parent account. Then created 2 sub-accounts under the TAX account, Input VAT & Output VAT respectively. Now, when I post the vendor bills or customer invoices, the VAT is recorded properly in these sub-accounts, and their main account TAX also shows a final figure. But, from here I'm not clear what to do. I passed an entry:
DR TAX
CR Bank
with the equivalent amount. This did make the amount to '0' for the TAX, but the 2 sub-accounts still have the respective amounts in them. Although, the Liabilities parent account was also showing a correct balance, as I think it just picks up the amount from TAX.
Not sure if this will be a correct way of doing, or maybe there are multiple ways to do this.
________________________________
From: Christopher Lam <christopher.lck at gmail.com>
Sent: Sunday, August 16, 2020 2:00 PM
To: Omer Hayat <omer.hayat at outlook.com>
Cc: gnucash-user at gnucash.org <gnucash-user at gnucash.org>
Subject: Re: [GNC] Recording Tax Correctly

Hi Omer, my approach is:

  *   VAT:Input VAT - an ASSET account
  *   VAT:Output VAT- a LIABILITY account
  *   VAT:VAT Return - an ASSET or LIABILITY account

and run the "Income & GST Statement" periodically, posting the govt returns as follows:
Dr VAT:VAT Return
Cr Bank

HTH, C

On Sun, 16 Aug 2020 at 07:55, Omer Hayat <omer.hayat at outlook.com<mailto:omer.hayat at outlook.com>> wrote:
Hi.
We have a 5% VAT charged on all bills and invoices. To the government, we pay the difference.
I have setup an 'Input VAT(paid to Vendor)' and 'Output VAT(received from Customers)' accounts under Liabilities, and set them up. These are recording the VAT paid & received from Bills/Invoices correctly. The Input VAT account has negative values, and output VAT has positive values. We are supposed to pay the difference of these.
For example:

VAT paid to Vendor
(50.00)
VAT received from Customer      75.00
FINAL VAT PAYABLE TO GOVT       25.00

Keeping the above example, I would like to pass one entry, and pay off the difference amount.
Example:
DR Final Payable to Govt
CR Bank
But, how can I pass the Debit entry? Should I create a 'Tax' placeholder account and pass it to that? But then the individual Input & Output VAT accounts might have a balance.

Please advise.
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