There has been an issue found in Tax Codes when , see the below:
An entry posted as adjustment in BHD:
Expense A/C 38.800 Dr.
Related Party A/C 38.800 Cr.
The Tax Codes selected for Cr. as VAT 5% (Custom Rate), when it calculates VAT it calculated as 1.848 BHD whereas suppose to be 1.940 BHD so there is difference.
Just to double check a new Tax code created and instead of Custom VAT 5%, Flat rate 5% were chosen than it calculates correctly 1.940 BHD
Kindly see why Manager showing this behaviour, the version is Desktop 21.10.25 (latest)
Thanks Lubos (Flat Rate) never applied but only as test, 5% Custom rate is giving 1.848/38.800 as 4.763% not 5% and what if the user want to have exclusive not inclusive…
Yes but it pertains to Journal Entry where there is currently no option to choose inclusive and exclusive, the link you shared doesn’t cover Journal Entries…
The reason journal entries do not have that option is because journal entries you have to balance yourself. You do not want tax codes to add extra amounts on top of your tax exclusive amounts and make your journal entries not balanced as a result.
That’s why when adjusting account balances using journal entries, always work with tax inclusive amounts.
If expense is 38.800 BHD + 1.940 BHD tax, then you debit 40.74 BHD.
But if 38.800 BHD already includes 5% tax, then tax component is 1.848 BHD.
There is another related issue, JE doesn’t allow VAT A/C if we don’t select the Tax code and it’s creating issue if the amount Debit, it allows only Expenses A/C whereas VAT is not an Expense for the company, kindly improve this procedure as creating unnecessary issues almost at the final stages of user acceptance…
This is by design. It is expected when you create tax codes, you nominate custom general ledger account where tax amounts should be posted. Then you can use this custom general ledger account in journal entries.
This JE is for adjustment only as inter-company, which other option you can suggest where the Expense will be 38.800 as Debit and 40.740 as Credit for the inter-company.
The accounting entry was posted in the 1st thread of this post, just to add further the Special Account used to reduce the GL Accounts in the Chart of Account, however should not effect.
VAT A/C is linked with VAT 5% and it’s calculated on Sales, Purchases etc but the issue facing in JE???
We can’t ask the user to have 40.470 as Expense as it will over-state the transaction…
So why are you entering 40.470 BHD if the expense was really 38.800 BHD?
So… you debit 38.800 BHD related party account and credit 38.800 BHD expense account. If the expense amount of 38.800 BHD included 5% tax, then you select tax code as you did.
Your problem is that for some reason, you believe tax component within 38.800 BHD expense is 1.940 BHD but it is really 1.848 BHD as Manager correctly calculates.
