[GNC] how to link an expense (a tax) to a invoice being issued
Mattia Rizzolo
mattia at mapreri.org
Fri Oct 22 05:59:07 EDT 2021
Hi David, thank you for your insights!
So, to highlight the differences between my thoughts and yours:
* prepaid stamps as an asset, not a negative liability
* tax passed as-is to the customers are not actually expensed (since
the invoice would have as the "income account" to debit the
Assets:TaxStampsPrepaid or Liabilities:TaxPayableDeferred accounts
directly)
* when not passing the tax stamp onto the customer, that would be my
expense, without any direct link to the actual invoice.
Is my understanding here correct?
Especially, from a formality point of view, is it really correct to *not*
expense the tax stamps I'm passing over to customers?
-Mattia
On Fri, Oct 22, 2021 at 12:26:18PM +1000, davidcousens49 at gmail.com wrote:
> Mattia,
>
> When you purchase tax stamps in advance, they become a temporary asset of your
> business which you would expense at the time you attach then to an invoice.when
> you purchase the stamps you would credit your bank account by the amount of the
> purchase and debit an appropriate asset account (e.g.
> Asset:Current:TaxStampsPrepaid).
>
> If you don't pass the tax onto the customer it won't appear as a line item in
> the invoice and simply becomes an expense on your business. You would at the
> same time as you raise the invoice and attach the tax stamp create a transaction
> which credits the above asset account and debits an Expense:TaxPaid account.
>
> If you are passing it on to the customerthen create a secondline in the invoice,
> Add an appropriate description,set the Income account to
> Asset:Current:TaxStampsPrepaid and set the amount of the attached tax stamp.
> This will add the value of the tax stamp to the A/R account and credit
> Asset:Current:TaxStampsPrepaid
>
> On the other hand when you raise an electronic invoice and payment is deferred
> to a future date, then the tax component is a liability on your business which
> you would record inan account labelled something like
> Liabilities:TaxPayableDeferred.
>
> Again if your business is paying the tax and it is not being passed onto the
> customer then in parallel to raising the customer invoice you would create a
> separate transaction which credits Liabilities:TaxPayableDeferred and debits an
> expense account Expense:TaxPaid and there would be no line item in the invoice
> to the customer.
>
> If you are passing the tax onto the customer, then when you raise the invoice
> you add a second line for the tax , set the Income Account to your
> Liabilities:TaxPayableDeferred account and enter the amount of the tax payable
> in that line. This will create a credit to the Liabilities:TaxPayableDeferred
> account with a matching debit added to the sum of the other lines to the A/R
> account.
>
> Wehn your tax liability is paid your check account is credited by the total of
> the amount paid and the Liabilities:TaxPayableDeferred account is debited by the
> same amount.
>
> This is of course a generic treatment and may be altered by specific regulations
> and law which may apply in your jurisdiction.
>
>
> David Cousens
>
>
> On Fri, 2021-10-22 at 00:01 +0200, Mattia Rizzolo wrote:
> > Hi people!
> >
> > With the disclaimer that I'm keeping these books for myself, as I'm not
> > required by law to keep them at all, here I come ask you about this
> > specific tax.
> >
> > Also, this turned quite longer than I thought it would, actually while
> > writing my thoughts cleared quite a bit... :) Guess that's a kind of
> > "rubber duck debugging"!
> > For the quicker version go straight to below where I describe my case in
> > way more practical terms.
> >
> >
> >
> > Background:
> > When I issue an invoice I may (or may not) have to pay a 2€ duty stamp
> > and attach it to the invoice. That's an effect specific to the fact
> > that I produced a document, and I also need to attach such duty stamp
> > to credit notes, for example.
> > Now, if I do a paper invoice, I most likely already bought weeks/months
> > prior a stash of those duty stamps. Instead, if I'm doing an electronic
> > invoice, the payment for those stamp is deferred to the next quarter.
> > Furthermore, I may or may not (my choice) bill the customer for the
> > expense of this duty stamp.
> >
> > So I am a bit lost on how to properly account for this thing. To me is
> > an expense, that may or may not be charged back to the customer, but I
> > would also like to gather data on, like, how many invoices I'm issuing
> > that I am not billing the duty stamp on, so I wouldn't like to "hide"
> > them into some random expense/income account.
> > The different methods of actual payment of them (in advance or
> > postponed) surely doesn't help make it straightforward.
> >
> > Probably the hardest part is that I would really like to tie the expense
> > to each invoice. I have no clue if there even is a way to do that, but
> > it doesn't seem like there is one. Handling invoices through the
> > GnuCash invoice system makes it impossible to me to add random splits,
> > is there even a chance I could do this?
> > If not, guess I would be stuck creating a separate transaction manually
> > each time I issue an invoice. (in the below examples, I'm referring
> > specifically to the two splits that invoice Expenses:Tax:DutyStamps) and
> > simply "linking" that expense to the invoice by the memo field.
> >
> >
> >
> >
> >
> > To clarify and recap, here was my thinking:
> >
> >
> > 1. The accounts (simplified naming, I have a deeper tree):
> > Balance
> > Assets:Banks:Checking 500.00
> > Assets:Cash 50.00
> > Assets:AR 0.-
> > Expenses:Tax:DutyStamps 0.-
> > Income:Invoices 0.-
> > Liabilities:Tax:DutyStamps:Pre 2.00-
> > Liabilities:Tax:DutyStamps:Post 0.-
> >
> > I decided to separate the Pre and Post variant of duty stamps since
> > they are after all handled completely differently and stashing them
> > in a single account would only create confusion later on IMHO.
> >
> > 2. When I buy "paper duty stamps" (that can only be bought in cash…):
> > Debit Credit Balance
> > Assets:Cash 2.00 48.00
> > Liabilities:Tax:DutyStamps:Pre 2.00 4.00-
> >
> > Here the Liabilities:Tax:DutyStamps:Pre represents a sort of prepaid
> > expense, resulting in a credit for me, which is hence recorded as a
> > negative liability.
> >
> > 3. When I issue an electronic invoice for which I am *not* charging the
> > customer:
> > Debit Credit Balance
> > Expenses:Tax:DutyStamps 2.00 2.00
> > Liabilities:Tax:DutyStamps:Post 2.00 2.00
> >
> > This is what I would love to have in my invoice posting transaction
> > (the one that also bears A/R and Income), but that I fear my just
> > simply not be possible.
> >
> > 4. When I issue an electronic invoice for which I am charging it back:
> > Debit Credit Balance
> > Expenses:Tax:DutyStamps 2.00 4.00
> > Liabilities:Tax:DutyStamps:Post 2.00 4.00
> > Assets:AR 2.00 2.00
> > ?????????? 2.00
> >
> > To what should I match that AR? It ought to be some kind of Income,
> > but I am not really sure, it's not really an income is it? It feels
> > constrained to use Income:Invoices. I was half-thinking to match it
> > against Expenses:Tax:DutyStamps (similarly to what one would do with
> > credit card rebates), but GnuCash won't let me do that from within an
> > invoice. Or am I looking at this from the wrong side and I should
> > just get an Income:TaxCollection kind of account?
> >
> > 5. When I issue a paper invoice, not claiming back the duty stamp:
> > Debit Credit Balance
> > Expenses:Tax:DutyStamps 2.00 6.00
> > Liabilities:Tax:DutyStamps:Pre 2.00 2.00-
> >
> > And there follows the rest of the invoice; like with case 3, beside
> > this magic linking that I would love to have with these 2 splits and
> > the actual invoice, I think nothing more is needed.
> >
> > 6. For the paper invoice claiming back the duty stamp, it should be like
> > case 4 with the :Pre account, nothing else.
> >
> > 7. When I go to settle the postponed duty stamp and the end of the
> > quarter I suppose I'll simply do:
> > Debit Credit Balance
> > Liabilities:Tax:DutyStamps:Post 4.00 0.00
> > Assets:Banks:Checking 4.00 496.00
> >
> > And be done.
> >
> >
> >
> > Am I in the right direction? Do you spot anything totally wrong? And
> > how would you handle these details I'm unsure about?
> >
> > Thank you in advance for any thought and input you might be able to give
> > to me! :)
> >
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--
regards,
Mattia Rizzolo
GPG Key: 66AE 2B4A FCCF 3F52 DA18 4D18 4B04 3FCD B944 4540 .''`.
More about me: https://mapreri.org : :' :
Launchpad user: https://launchpad.net/~mapreri `. `'`
Debian QA page: https://qa.debian.org/developer.php?login=mattia `-
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