It appears we are talking about different things. The above post describes how to investigate a coding bug. Manager does not have a coding bug, it behaves as designed. It has a design bug.
It appears there is a variety of opinions on what defines a taxable sale/purchase (and standards accounting software must achieve).
Option 1: Every credit line item must be a sale for tax reporting. Every debit line item must be a purchase for tax reporting.
This interpretation is hard coded into all Journal entry, Receipt and payment so these transactions are consistent with this interpretation. However if this convention is correct then the encoding of debit notes, credit notes, and negative amount line items in invoices, are all incorrect. As a result sales & purchase totals reported in Manager are lower than this accounting convention dictates.
Option 2: A taxable sale or purchase is defined by jurisdiction specific requirement on the goods / service provided, supplier obligations, and purchaser obligations.
This interpretation is hard coded into all invoices, credit notes and debit notes in Manager so are consistent with this interpretation. However if this convention is correct, then all negative line items in sale and purchase “cash” transaction and about half journal entry line items, are all incorrect. As a result sales and purchase totals reported in Managers are higher than this accounting convention dictates.
Most jurisdictions have specific invoice documentation requirements to enable claiming or when charging / collecting taxed supplies. When making a taxed sale, an invoice must be issued by the seller to the purchaser (and include jurisdiction specific requirements such as VAT amount and type, sales total, time limit from sale to invoice delivery). Conversely when making a purchase, to enable business to legally claim a tax credit, an invoice from the seller is required (meeting jurisdiction specific requirements including purchase total, VAT amount, number of years the invoice must be kept to meet tax department auditing requirements). Importantly a businesses documentation requirements for a sale are not the same as the documentation requirements for a purchase. Transactions entered in Manager via an invoice, credit or debit note require the same documentation for all line items (all line items in a transaction are either a sale or purchase) so are consistent with these documentation requirements. Transactions entered in Manager via “cash” sale/purchase or journal entry allocate sale/purchase per line item, implying a documentation requirement not supported by any POS system, customer or supplier.
In jurisdictions where this interpretation of sale/purchase applies, a positive tax sale line item is not equivalent to a negative purchase line item. The reportable total sale, total purchases and documentation requirements are different.
Option 3: Accounting convention can be altered on a per transaction basis at the book keepers discretion
If this option is correct, both of the above options could be used in a business during a taxation reporting period. This is the current way Manager behaves.
For it to be correct a jurisdictions taxation authority would need to:
- Accept either interpretation of sale / purchase and allow changing between reporting standards many times within a reporting period. Or
- Require accurate reporting of the net tax liability but have no accuracy requirement when submitting total taxed sales or total taxed purchases. Or
- Have no invoice issuing requirements for sales, or invoice retention requirements for purchases.
Changing between accounting standards is permitted where both methods are permitted by the taxation authority for that business for example between accrual vs cash basis accounting. However doing so is only permitted between accounting period, with the consent of the taxation authority, and reporting of any transactions spanning the reporting periods Choosing an accounting method | Australian Taxation Office
Accuracy of submitted amounts : all jurisdiction requiring reporting of total sale or total purchases as well as net tax liability; require the user to declare all amounts are accurate, not just the net tax liability. For example in Australia when submitting your business activity statement the user must sign
Definition of a tax sale / purchase : despite looking I could find no jurisdictions where a sale / purchase is defined as required by option 1 above. Every jurisdiction I have examined require option 2 above. For example in Australia a Taxable sale GST definitions | Australian Taxation Office requires
And you must provide a “Tax invoice” within 28 days Tax invoices | Australian Taxation Office
Neither of these conditions are met when returning goods, getting a discount on a purchase, deducting a previously paid deposit or any other example of a negative line item entered in a “Cash” purchase.
For negative line items in sales when a POS system other than Manager is used (and Manager is not used to generate invoices) similar issues arise. When I give a customer a refund, the customer never supplies a tax invoice, nor to they accept an in-store credit, they always require a cash refund. So if I was to consider that transaction in isolation as my business purchasing something from the customer, and without receiving or retaining a tax invoice for 5 years, I can not legally claim a tax credit. The same issue arises with all other negative line items in Manager “Cash” sales.
In support of the above interpretation, the ATO explicitly states when a discount is used the discount must be subtracted from the price BAS and GST tips | Australian Taxation Office
In the UK returns are explicitly required to be entered as negative sales amounts [Withdrawn] How to report EU sales made on or before 31 December 2020 for VAT - GOV.UK
Penalties for submitting false taxation information : All jurisdictions have significant penalties for submitting false information. Taxation authorities accept submitted information on face value (so not being prosecuted is not evident prior submission were correct) and instead use some form of auditing to check and achieve compliance. Having inadequate accounting practices is explicitly penalised in Australia https://www.ato.gov.au/law/view/document?docid=PSR/PS20073/NAT/ATO/00001
If NGSoftware considers submission of error free taxation information a secondary add-on feature then I have seriously misjudges the company and their product.
Not every credit line items must be a sale . Similarly not every debit line item must be a purchase . Coding forcing this requirement is a bug. In a business which is running well there is a statistical association, so the bug produces numbers which look superficially correct however that makes the bug worse as users are less likely to detect and correct it.