Joe

You are right. This is a classical example. You have an amount where tax is included. How many percent to reduce to get the correct tax value. Maybe a good idea to put this on the Wiki.
@apmuthu, will you please?

Joe

The results that apmuthu is getting are because he is using the percent values that apply to the $100 base amount to calculate a result from the TOTAL amount.  In short: if the journal entries are calculated on the total amount, he needs to adjust the percentages to apply to the total amount of $108.25.

Here's how it's done:

We know that we expect $3.50 in sales tax from every $108.25 invoiced.  Therefore...
Sales Tax: $3.50/$108.25 = 3.0023%  THIS IS THE PERCENT TO APPLY TO THE TOTAL TO GET 3.5% of the base.

3.5% of $100 = 3.0023% of $108.25

Similarly...

Service Charge: $5.00/$108.25 = 4.6189%

So that $108.25 * 4.6189% = $5.00

You can see that this is nothing more than a simple algebra problem where the equation is $100 * 5% = $108.25 * X
Solving for X gives:
X = ($100 * 5%) / $108.25
X = $5/$108.25
X = .041689  [4.17%]

Never underestimate the importance of good math skills.  If you need a refresher or rehabilitation, do as many lessons at KhanAcademy.org as you can or need to.

Good Revenue to You!
-Leland

I am trying to make a quick entry for a journal entry with a percentage calculation, but it's not calculating the values I want.

By way of example, in the journal entry, I want to credit one account for 108.25.  the corresponding debits should be 5.00 for tax, 3.25 for service fees, and 100.00 goes into an asset account. 

I set up a quick journal entry and added the following quick entry lines:

1. % amount of base, reduce base: 3.25%
2. Taxes included, reduce base: choose GST(5%)
3. remainder: into my asset account

Now when I go to make a journal entry, enter 108.25 into the quick entry line and press go, I get:

3.52 for service fees
4.99 for tax
99.74 into the asset account

or if I swap the percentage and tax lines:

5.15 for tax
3.35 for service fees
99.75 into the asset account

It seems the tax is calculated from the remainder value, but the percentage is not.  Is there a way to get it to work like I want, preferably without putting in a dummy tax account?