There are number of topics discussing issues with tax codes and how Manager decides whether tax transaction is a sale or purchase.
I’ll start with the background of the issue.
Unlike other accounting systems, Manager doesn’t require seperate tax codes for sales and purchases. In most countries with value added taxes, it is required to know total taxable sales and total taxable.
For this reason, accounting systems will have generally two separate tax codes to manage this requirement. One for sales, one for purchases. So for example, if VAT is 20%, the accounting system will have two tax codes:
- VAT 20% on sales
- VAT 20% on purchases
Then accounting system can give you total amounts for each tax code.
In Manager, you can get away with just single tax code:
- VAT 20%
And you can use it for both sales and purchase transactions. It’s up to Manager to figure out which transactions are sales and which are purchases.
Tax Summary report which will summarize all transactions whether they are sales or purchases per each tax code.
This works well for most cases because if tax code
VAT 20% is used on sales invoices or credit notes - it is always a sale. If
VAT 20% is used on purchases invoices or debit notes - it is always a purchase.
Where it doesn’t work well are receipts, payments and journal entries. We can’t look at cash receipt and say it is a cash sale because cash receipt can also represent refund from supplier in which case you wouldn’t want refund from supplier to be reported as sale. You’d want refund from supplier to be reported as negative purchase.
I came to realize that solution is to be able to attach customer or supplier to any tax transaction. If you are able to do that, it’s easy for Manager to determine whether any transaction is a sale or purchase.
Sales invoices, purchase invoices, credit notes and debit notes already have customer or supplier attached to the transaction but there was no mechanism to attach customer or supplier to receipts, payments and journal entries.
The latest version (20.8.81) is fixing this and it is now possible to attach customer or supplier to receipts, payments and journal entries as well.
Here is how it works:
Let’s say you are receiving refund from supplier called
Brilliant Energy. Before entering the refund, you have 500 in purchases subject to
Refund is entered as receipt transaction. Normally receipt transaction would be added to
Sales side by we can avoid this by selecting supplier name after selecting tax code
Because the transaction is now associated with supplier, it will be always considered as a purchase. Since this is a refund, it will be reported as negative purchase.
Also, when you click on
Net Purchases amount, you will see supplier name as a column.
So you can see supplier names associated with tax code even if they are cash transactions. This is useful for management purposes but also important for upcoming country-specific reports (in some countries some businesses are required to provide list of suppliers and how much tax the business has paid them).