When paying a purchase invoice you have previously entered on the system should you enter it as a taxable payment, tax free payment or a no tax payment?
This is in relation to an invoice that’s previously been entered onto the system and itemised so that some items are taxable and some are tax free. The invoice is entered correctly and the GST amount lines up on the invoice nicely.
For example the invoice is $1000, but there’s only $90 GST as $100 of the invoice was tax free.
When I make a payment from the cash account there is the tax box at the end of it. It appears as though it doesn’t matter what I put into this box (leave it blank, apply GST, or make it GST FREE) my tax liability remains the same. I’m assuming this is because it’s allocated against a tax invoice that is itemised the way it should be.
But I’m wondering what i should or shouldn’t be putting in there. I feel that putting GST or GST FREE are both incorrect because the invoice contains two tax categories (GST and GST FREE). Or should I be breaking the cash payment up into a GST component and a GST FREE component, even though I am only making one payment?
I ran an audit with the payment not allocated to either tax bracket, and the payment hasn’t fallen into the No Tax column. So I’m assuming it’s balanced out.