[GNC] Recording Tax Correctly

[Michael or Penny Novack]

On 8/16/2020 3:54 AM, Omer Hayat 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.

I am not SURE about your description of the accounts, but let's say that 
under liabilities you have an account VAT and under it children "VAT 
paid" and "VAT received" << set up that way, the amount shown for the 
parent will be the net >>

Are you asking what the transaction would look like when you paid the 
net amount to the government? Worried (correctly) that if you did that 
by debiting the parent (correctly bring the net to zero) it still leaves 
balances in the children?

What makes you think that a transaction has just one debit and one 
credit? Have you not yet entered any "split" transactions? Try doing 
that. The transactions would debit "VAT received", and credit "checking" 
and "VAT paid"  << the amount of the credit to checking would be the 
amount of the net >>

Michael D Novack