[GNC] How can I find cost of expenses, including tax?

[Maf. King]

Morning Dave.

I think the answer to this depends on the question "are you planning to 
register for VAT?", and also falls squarely in the category of "ask your 
accountant for his opinion on how to do this"

If you are planning to register, then you might as well start your books with 
that goal in mind and have the appropriate VAT collection accounts in your 
tree from day 1.  If you are registered for VAT then the vat charged is not 
part of the cost of stock, but is technically an asset (government will pay it 
back (eventually and if you have no vatable income in a 1/4 )).

If you are not registering, then either: 

you don't record the VAT portion independently of the stock, and it just costs 
20% "more"  ( i think this is what your accountant will say)

Or, you record the VAT split to a separate expense account to track it - then 
you have 3 expense accounts - stock, office and VAT_Paid... and no easy way to 
deduce what you paid for stock+VAT....which  seems to me to be where you 
are.... as such it wont matter for the annual accounts and tax return, at the 
simple level for a non-vat reg entity you are pretty much reporting 2 numbers 
(income and expense); the actual detailed breakdown of the expense is not 
exposed to anyone except you and your accountant.

Conceptually I think you are mixing two models: either the cost of VAT is the 
cost of VAT and the cost of stock is net, or the cost of stock is gross and 
you have no cost of VAT.... you can't really mix the 2 models and expect 
accurate or easy answers.... 

You *could* mirror your expenses tree into a VAT branch too...
Expenses: 
    Stock
    Office
    VAT
        Stock
        Office
etc.  
but that seems like pain for little gain!

HTH,
Maf.




On Tuesday, 20 December 2022 00:46:14 GMT Dr. David Kirkby wrote:
> My company is not registered for VAT (tax), but I probably have to pay 20%
> VAX (tax) on 75% of the items I buy.
> 
> I have the following accounts
> 
> Expenses
> Expenses -> Stock
> Expenses > Office supplies
> 
> I can not see how I can determine how much I have spent on stock,
> *including* the TAX.
> 
> The account Expenses is a placeholder account, but I see that all the VAT
> goes in there. So
> 
> Expenses -> Stock
> 
> has two sorts of transactions in it
> 
> 1) Items where no tax has been paid
> 2) The price of items excluding the tax
> 
> which seems a bit of a muddle. That’s 100% of the cost of some items, but
> 80% of the cost of the others.
> 
> I can not find the cost (including the tax) from adding up
> 
> Expenses
> and
> Expenses -> Stock
> 
> because Expenses will contain the tax paid on Office supplies too.
> 
> At the end of the year my accountant will want to know how much I have
> spent on stock, but I can’t see a way of exporting the transactions so that
> the file contains that information. My accountant would
> 
> Expenses -> Stock
> 
> but only some things from the placeholder account
> 
> Expenses.
> 
> I assume that there is a way out of this problem.
> 
> Dave