The sale had 10% GST paid. Forgiving the debt does not have GST
@sharpdrivetek yes, thatâs correct, so seeking best accounting practice and the way Manager handles this transaction issue.
Iâm not an accountant, but not unfamiliar with accounts as been P&L responsible for half my adult life.
Just need a little guidance to do it right once, and then Iâm all good
in this case you need not select any particular invoice beside the customer in the line. just a single line with the total of all outstanding amounts will be enough. Manager will automatically take care of the invoices by crediting them oldest first.
i understand what you mean. but your perspective is purely accounting while both me and @Elfroar are looking at the customer relationship aspect too.
adjusting the tax will also have implications on the customer which i believe is not something @Elfroar wants to do at present.
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Again correct @sharpdrivetek , the client has given me over $250K business, and is still placing orders with a healthy relationship, Iâm not going to upset them over $16 here or there, this is an operational decision.
The only question is how to remove the red flag outstanding amounts, not mess up the bank reconciliation, and do so correctly, to comply with law and the Manager software method of handling this and not to confuse this grumpy old man in the process.
I think this is why @lubos suggested to post it in here, because Iâm not the only one facing this and it may prompt a step by step guide to be developed, and I agree that would be very helpful.
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It is his relationship with the tax department I was trying to protect, which depends on local tax laws.
I understand he is preserving the relationship with his customer, which is why he is paying / writing off their bank fees out if his marketing budget.
Yes it needs to be compliant with tax laws (here in Aus - ATO).
Iâm not in disagreement with any method of recording the transaction, just asking how that should be done
this is already protected if he pays the full tax due on the invoice which i believe he does irrespective of the customer payment. the correction journal is only to balance his P&L monitored by the income tax department which is not the concern of the sales tax department.
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BTW, to date, Iâve not used the Journal (or had need to) so I wouldnât mine a little help there too if possible, there may be many others in the same boat as me who will benefit.
and discuss with your accountant if the Journal entry needs to include GST10% tax code on each of the credits @sharpdrivetek has shown.
Actually in this case I suspect a correct invoice would show the bank changes as an extra $16 (varying with invoice) but GST free (as bank changes generally are in Australia).
The debit which is being forgiven then is on a GST free component, so is also GST free.
However I would still recommend you had a conversation about it with your account next time you see them as it will probably occur again in the future.
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I have solved it differently having a similar problem with exchange fees
I put a credit note to the customer and allocate the amount to exchange fees
Does this mean that you created an account tagged âexchange feesâ different from the gains/loss in exchange rate?
I do not know what @restdev did. But you should use a separate account. A name like Bank fees might be more appropriate. The account you mentioned for foreign exchange gains and losses is definitely not to be used. That is an automatic account associated with exchange rate fluctuations.
Here is the fix my accountant gave me:
First to recap the issue to match this sample.
Invoice $ 3,094.30
Client remittance $ 3,094.30 (i.e. paid in full)
Received in bank $ 3,078.30 (i.e. short $16)
Short $ 16.00 (as bank fees from clients bank, which we elect to waiver)
To correct this âŚ
Edit or perform the Receipt Paymentâ transaction as if bank has fully received the total payment first of $ 3,094.30,
This will close out the invoice, but bank reconciliation will be out by the $ 16.00 fee
Then second step is to make a separate merchant bank fee transaction to pay the bank fee $ 16.00 under the âReceipts and Paymentsâ as you would for other bank fees.interest
This will both remove the outstanding balance on the invoice and balance the bank reconciliation
@Elfroar, your accountantâs suggestion is financially identical to the solution presented by @sharpdrivetek 33 posts ago. The difference is that you have two transactions, neither of which matches an actual transaction in your bank account. Following @sharpdrivetekâs approach produces one bank receipt in Manager that exactly matches the one to your bank account.
Thanks Tut, I did see that there, but this is the way my accountant wants it done and in the merchant bank fee entry I note the corresponding invoice number and keep a hard-copy of both in the invoice file for future reference