• lmn
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Topic: change invoice behavior/flow

Hi Guys,

I need some help with invoice and taxes. When I create an Invoice of USD 1000 with sales tax of 5%, the system:

Debit (Assets) Accounts Receivables      usd 1000
Credit (Liabilities) Sales Tax    usd  47.62
Credit (Income) General Sales   usd  952.38

That is correct, and show my income of 952.38. However, I need my income gross (usd 1000); In this case, how can I change this behavior to:

Debit (Assets) Accounts Receivables      usd 1000
Credit (Liabilities) Sales Tax    usd  47.62
Credit (Income) General Sales   usd  1000
Debit (Expenses) Sales Tax expenses   usd  47.62


Thanks in advance


Luis Nogueira

  • avb3
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Re: change invoice behavior/flow

Why would you want to do that?

Any funds collected from sales tax are not gross sales; in fact, in many jurisdictions you are holding those funds "in trust" for the taxing agency. It affects cashflow, but not your P&L.

  • lmn
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Re: change invoice behavior/flow

Brazilian Tax System is one of the most complex... We have a special tax system for small income Companies. The Income TAX varies (from 6% to 20%) according to the the last 12 months income. Separating Credit (Income) General Sales would make this total income more evident.

For other companies, we also don't have a simple VAT, but 4 direct taxes (PIS, COFINS, ICMS and IPI) some of them are also variables, and we can't compensate. On the top of them, we have income revenue tax, with can be reducted from some taxes (but not all). Also, we have some indirect tax (for example if you sell cigars, alcohol or fuel)...

In both case, the best way for us would be to have a expense account for taxes.

Can you imagine a way to do it?

Thanks for your reply!

Luis Nogueira

  • avb3
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Re: change invoice behavior/flow

lmn wrote:

Brazilian Tax System is one of the most complex... We have a special tax system for small income Companies. The Income TAX varies (from 6% to 20%) according to the the last 12 months income. Separating Credit (Income) General Sales would make this total income more evident.

For other companies, we also don't have a simple VAT, but 4 direct taxes (PIS, COFINS, ICMS and IPI) some of them are also variables, and we can't compensate. On the top of them, we have income revenue tax, with can be reducted from some taxes (but not all). Also, we have some indirect tax (for example if you sell cigars, alcohol or fuel)...

In both case, the best way for us would be to have a expense account for taxes.

Can you imagine a way to do it?

Thanks for your reply!

Luis Nogueira

Luis, let me talk to a colleague of mine who used to work in the audit section with Price Waterhouse in Brazil (she is Brazilian). I can imagine a number of ways of doing this, but I would rather have her input.

  • avb3
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  • Registered: 07/10/2009
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Re: change invoice behavior/flow

Luis, upon discussion with my colleague, she wonders if this way of presentation is required by any specific legislation?

Can you perhaps advise why you want to show the tax as an income, and then as an expense? It does not make sense in the normal way of doing things.

BTW, she agrees, that Brazilian tax law is very complex smile

  • lmn
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Re: change invoice behavior/flow

Thanks a lot for you help. You have no idea how complex it is (some years ago we had a TAX on Bank Account, every cheque you fill or every money you withdraw the government takes .38% of it!)

I don't know to be honest - But I need this information (our total revenue gross) to be able to calculate the Tax rate for the next month.  I've made some progress:

I create an account called “Temp TAX”, set the tax to use this account for sales tax. So if we use the example above, instead of Credit (Liabilities) Sales Tax, the system credit this “Temp TAX” - Then I created a Quick Entry/Journal Entry that:

Debit Temp TAX     100%
Credit (Liabilities) Sales Tax    100%
Credit (Income) General Sales   100%
Debit (Expenses) Sales Tax expenses   100%

Every end of month, I will check the balance for “Temp TAX” and do a Quick Entry of that amount. The system will put the figures where I need to see it.

Do you have a glue on how I can automatically set the system to check for any available balance on “Temp TAX” and execute this journal entry?

Thanks again.

We have just finished a Portuguese translation to FA - I hope more people from Brazil start to use it...