Goods Receipt & Delivery Notes improvements

@lubos can you please look into this. i have found the below a bit unusual regarding how goods receipt and delivery notes should work. please correct me if i am mistaken.

  1. the purchase invoices do not have rounding option.
    so the accepted practice is to create an account under the Expenses group and allocate the rounding value as a line item when making the purchase invoice.

now when the Goods Receipt is made for the purchase invoice, even the Rounding is shown as a blank line in the edit screen


after creating the goods receipt, the Rounding is shown as a line item

this is something weird. an account should not be shown in goods receipt as they are not anything we receive in physical form.

  1. when a non-inventory item is sold separately, there is no necessity to create a goods receipt for the same. so maybe the option Copy To New Goods Receipt should not appear for such invoices (Delivery Notes in case of Sales Invoice).

  2. when a non-inventory item is sold along with other inventory items, creating a delivery note or goods receipt should not include the non-inventory item.

Can you post a screen shot of the purchase invoice so we can see how you entered the rounding initially?

sure. here is the edit screen

What you have done is enter a line item with no item code or description, but with a cost. So Manager has to include it on the purchase invoice. Since there is nothing else, it uses the account name.

The blank line on the goods receipt entry form occurs because that screen does not show accounts, so there is nothing to put there. But it is proper to include everything on the purchase invoice, because you might have purchased non-inventory items or other goods or services. When you view the completed goods receipt, Manager picks up the account name just like it did for the purchase invoice.

My question is why are you using rounding on purchase invoices? The purchase invoice should match the supplier’s sales invoice. If the supplier rounded the sales invoice, that constitutes a change to the purchase price. You should do one of two things:

  • Adjust the unit price so the purchase invoice matches the sales invoice
  • Enter rounding against the inventory item with a blank quantity. This will adjust average cost without affecting inventory counts. This is exactly like allocating freight-in as described in this Guide: Add freight-in to inventory item costs | Manager. The adjustment can be positive or negative, although I would not use a supplier who rounds up.

true. but that was the intention. the problem is the same showing on the goods receipt which is unnecessary.

understood. but Rounding is not a physical item to be received, it is just an account used to match the difference with received invoice. again, anything other than an inventory item need not be shown on a goods receipt.

the unit price is the same as the unit price mentioned by the supplier on their sales invoice. i do not want to change that.

i do not think adjusting the rounding amount with an inventory item is a good practice and you have given the reason yourself, it will show the wrong average cost.

the rounding difference occurs in the tax calculation usually and not on the subtotal. so i put the difference amount to the rounding account and then make journal entries to correct the Tax payable values.

It isn’t unnecessary, because you need to be able to record receipt of goods which were not purchased for inventory. For example, you order a desk for your office.

Not true. It is an adjustment of price. Conceptually, it is something of value (positive or negative) that has been received by you.

This might get you into trouble with your tax authority. Rounding is actually a changing of the price paid for items, either a discount or a premium. If those items are taxable, your tax calculation should be different. The way you are doing things, you are recording a tax-free purchase of the rounding amount.

how do you deliver something which is not physical? when there is no such delivery how do you make a receipt for it as goods? your example of a desk is a physical item.

the price of item is not adjusted as shown in my example, it is the tax value which is rounded.

the supplier issues a sales invoice with the tax declared as 7.00
i am just making it the same. see the screenshot in my initial post for reference.
i am not evading tax, i am just liable to pay the exact tax value shown by the supplier in his monthly returns i.e. 7.00 and not 6.60

If it is a service you provide the service. Someone buys machinery and installation services for the machinery. You might want to document that both the machinery and the installation were delivered.

And that is what will get you in trouble. Whether being collected or paid, the government is not going to stand for alterations of taxable amounts.

Well, your transaction shows paying 6.60, not 7.00. And your obligation under the law is not to pay what the supplier charges anyway, but to pay the correct tax on the actual price of goods and services. The way you are entering things, you are changing the price of the goods. Therefore, the tax changes. I assume IGST is an offsetting tax, so the amount you owe for taxes you have collected from your customers will now be incorrect.

maybe i need to explain better. below is the invoice i received

now this is the purchase invoice Manager creates.

now the supplier declares in his tax returns 284 as the tax charged. i get 284 as tax credit and not 283.92 which Manager calculates. So i should be adjusting my Tax payable balance in Manager accordingly and hence the journal entry.

So the situation has nothing at all to do with rounding. The problem is that the supplier stated the wrong tax amount. In doing so, the supplier is overcharging you. So the correct action is to obtain a corrected invoice from the supplier.

it is a common and accepted practice to round the tax amount. anything above 0.5 is rounded-up and below 0.5 is rounded-down. they do not do it manually but is a result of their accounting software. also, it is not us who can decide what accounting software our supplier should use.

to say legally, an extract of Section 170 of the GST Act in India
The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.

Incorrect - It is only the Supplier (seller) who is registered and authorised to charge taxes on behalf of the Authorities and therefore it is solely their responsibly for charging the “local law” related taxes on the transaction.

The Customer (buyer), has absolutely no legal authorisation to amend / alter / change any of the taxes being charged by a Supplier. The taxes are only charged on Sales not on Purchasers.

So that “there are no tax implications” a Customers records MUST match the Suppliers records."
To do otherwise permits the Customer to record whatever they think is right - and that allowable thinking has never been a clause in any tax act. Any perceived errors should always be referred back to the Supplier for correction - NOT one sided self correction.

I think Tut already said this @Brucanna.

From the quote above @Tut suggested getting an updated invoice to put to bed all the problems

there is no need to get a corrected invoice as rounding of taxes is acceptable by law.

If tax amounts are required by Indian law to be rounded, then the issue is that you are not using a 12% tax rate, as happens when selecting the in-built tax. Only rarely will that 12% tax rate produce the correct tax. Almost always, the tax computed in accordance with Section 170 will be a fraction of a Rupee different than the 12% Manager calculates.

What the law does not seem to allow is arbitrary changing of prices without simultaneous adjustment of tax paid. Your method of entering rounding amounts does just that without adjusting tax. Granted, the amounts are small, but the result is still incorrect. To remedy this, the rounding amount itself would have to be subject to the tax code. Then, of course, you would have a different rounding amount to deal with, starting an iteration loop.

The solution seems to be a more complex tax calculation algorithm for the Indian in-built taxes. There are some currencies in Manager that truncate or limit amounts to denominations in circulation. The Icelandic króna is an example. Something similar might work here, limiting tax amounts to whole rupees. But this topic has strayed quite far from the subject of goods receipts and delivery notes. If you want different tax calculations, I suggest starting a new topic, which could be put into the Ideas category.

I may not have expressed myself clearly enough. What you say concerning suppliers’ responsibilities is correct, but they also have an obligation to assess the correct tax. If they have assessed an incorrect amount, the remedy is to get that corrected so your records do match theirs.

What I was not aware of was the Indian law’s provision making the tax rate flexible to limit amounts to whole rupees.