[GNC] Recording Tax Correctly

[Christopher Lam]

As I said before

VAT:Input VAT receives only VAT on Purchases
VAT:Output VAT receives only VAT on Sales
VAT:VAT Return receives only periodic government VAT transfers

The VAT parent account does not receive any splits; but its balance
(including children accounts) will tell me, roughly, the VAT payable (or
receivable). It will reset towards zero.

On Sun, 16 Aug 2020 at 13:46, Omer Hayat <omer.hayat at outlook.com> wrote:

> @Christopher Lam <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> 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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