• tom
  • Senior Member
  • Offline
  • From: USA, FL, Tampa
  • Registered: 03/24/2009
  • Posts: 326

Topic: Bank Payment Question

(Should this section be called "Banking and General Ledger" to match th FA categories?)

I need to pay my sales tax...

I also get a Collection Allowance for collecting the tax, if I pay on time.
How should I account for this?

I was thinking about entering a payment and select each of the Tax types/rates I am paying
and then for the Collection Allowance I will use the GL 4500 "Prompt Payment Discount" and enter a negative payment.

Will that take the Collection Fee and move it from "Sales Tax Collected" and put it in Income?

tom

tom's Website

  • tom
  • Senior Member
  • Offline
  • From: USA, FL, Tampa
  • Registered: 03/24/2009
  • Posts: 326

Re: Bank Payment Question

Great... now a SNAFU...

Last year I started using FA in june and was not doing everything right... so I reset my DB fresh and entered initial balances etc...

I need to move some money from "some account" to my Sales Tax GL's or just do a misc payment directly from "some account"

The big question... What GL should I use for "some account"

I want to get it right so that next year I am not totally confused (well because of taxes anyway)

Since the tax was collected last year, it may make sense to use "3590 Retained Earnings - prior years"

I have credit balances in the following:

1060 Checking
1200 Account Receivable
1510 Inventory
2100 Accounts Payable
2150(2152) Sales Tax collected
3590 Retained Profit - Prior years
4010 Sales
4430 Shipping & Handling
4050 Purchase price Variance

The more I look at it, I think I should use 2100, but I could have it backwards...

tom

tom's Website

  • joe
  • Administrator
  • Offline
  • Registered: 03/15/2007
  • Posts: 5,107

Re: Bank Payment Question

Hello Tom.
Your first question. It seems correct what you did. Credit bank. Debit the Sales Tax accounts. And finally credit Prompt Payments (yes it is a revenue).

The Difference between Assets and Liabilities is the Net Profit for the year. Also the difference between revenue and expense is the Net Profit.
If the balance is positive (positive Net Profit is normal) you credit this value Retained Earnings. And you should debit an Account called Net Profit Year (I guess it is called). This should be done on the last day of last year.
FA does this automatically when you close a fiscal year, but you can also do it yourself.
But since you have had problems, it maybe better you do it yourself. Then you can better fine-tune it.

I hope this helps, Tom. You could eventually also talk to a local Accountant to get some advice regarding this.

/Joe

  • tom
  • Senior Member
  • Offline
  • From: USA, FL, Tampa
  • Registered: 03/24/2009
  • Posts: 326

Re: Bank Payment Question

It dawned upon me that the real answer is to fix the Initial Error I made.

I should have added initial balances in the correct Sales Tax GL accounts.

So I see two solutions:

1) Pay the taxes from "Retained Earnings" (since that is where the money was put when I set the Initial Balances)

2) Transfer the Taxes from Retained Earnings to the right tax accounts and then pay as I first suggested

I like #2 since it feels much cleaner.

So I did a Journal Entry Debit 3590 $6.46 and Credit 2150 $5.54 Credit 2154 $0.92
(I did a backup first of course!)

I then did the payment as I first proposed...

Wow this is frightening... I think I am getting the hang of this...

That looked bad... I did The First Journal Entry, voided it and tried a second time.
When I did a Tax Report they both showed up...

I think next year I will pay the taxes before I close 2010 so I can pay it from the 2010 books...

I restored from backup and followed Idea #1

I will try voiding some JE's on my backup server and let you know if there is a problem...

tom

tom's Website

  • tom
  • Senior Member
  • Offline
  • From: USA, FL, Tampa
  • Registered: 03/24/2009
  • Posts: 326

Re: Bank Payment Question

Is this a bug?

When I did this JE:

Debit 3590 $6.46 and Credit 2150 $5.54 Credit 2154 $0.92

It also added 2 records in 0_trans_tax_details

Firstly: Should it have done that?
(I was just moving money between accounts not collecting money from the outside.)

If that is correct then in my next step when I voided the JE, should it (could it?) have voided the trans_tax_details?

tom

tom's Website

  • joe
  • Administrator
  • Offline
  • Registered: 03/15/2007
  • Posts: 5,107

Re: Bank Payment Question

Yes, voiding a JE also void trans tax details.
Adding a JE with tax account will also create a trans_tax_detail record.

/Joe

  • tom
  • Senior Member
  • Offline
  • From: USA, FL, Tampa
  • Registered: 03/24/2009
  • Posts: 326

Re: Bank Payment Question

Well when I voided the JE it left the trans_tax_detail records with non-zero values.

I have 3 copies of my db...before, during and after... I can send them to you...

I was going to try on the demo site, but I need higher privs to test there

tom

tom's Website

  • joe
  • Administrator
  • Offline
  • Registered: 03/15/2007
  • Posts: 5,107

Re: Bank Payment Question

Hello Again Tom,
You are right tom. It didn't void the amount, because the type was set to Bank Payment. A safety-guard that Janusz did some while ago.
But this is not a big deal here.
IMPORTANT.
You must run the Tax Report before you make any payments from the tax accounts inside the tax period.
The trans_tax_details holds the tax information on the documents. But it is also used for the quick entries to make cash sales or payments for utility bills.
So when you pay tax and debit a tax account, the statistic in not available anymore, because the trans tax details are updated.
The next time you run the tax report is maybe one month (period) later and now the payment from last period is no longer picked up on the new tax report. After the tax report is run, and you have a hardcopy you can pay/receive your tax for that period.

I would prefer if you do the payment in the Bank Payment. Then if this payment is voided, the trans tax details are also voided.

/Joe

  • joe
  • Administrator
  • Offline
  • Registered: 03/15/2007
  • Posts: 5,107

Re: Bank Payment Question

Another tips regarding the tax paying.
If you have a tax reporting period for January and print this tax report out in the beginning of February. You want to pay this in February.
Then you should consider using an extra liability account for accumulated tax.
Then you can empty the tax accounts per Jan 31 and counter book them on this accumulated tax account. Now you are not destroying the statistics for February when you are paying the tax. This entry will debit the accumulated tax and credit the bank account.

I will put these instructions on the Wiki.

/Joe