Tax payable upon receipt

1

In this particular case,
The service tax of 6% is to be payable only upon receipt of that amount.
For example, if a line item of sales invoice is 100.00, with the tax, the total invoice amount is 106.00.
I’ve created the tax code for it and when I create an invoice, this 6% tax amount of 6.00 will automatically goes into Service tax payable liability account. But it will have to be paid once the customer paid me the invoice only.
Here I want to clearly know that how much I’m payable at this point (means how much I’ve already received from the customer instead of total payable amount from all invoices)

What I do now is, create invoices as usual, all the 6% is being accumulated in to Service tax payable liability account. End of each month I manually calculate what are the sales invoices I’ve got paid and move that total amount of 6% (received) to another liability account called “Payable to customs” via journal entry and clear the amount through payments.

My question : Is there any shorter/automatic way available in Manager.io to carry out this task.(without manually calculating and using journal entry)?
If anyone can give me some ideas of how to do it will be much appreciated.

2

You should use cash basis when generating your tax reports:

1 Like
3

Thank you @Ealfardan for your initiative to answer my question.

Here you mean that generate a report in cash basis to easily calculate the received amount.

That means I no need to calculate one by one manually, calculate the real payable easily. But still need to do a journal entry to tax clearance liability account (in this case From Tax payable account to Payable to customs account)
This is what I understood from your answer. Am I correct?
By the same time which report(in cash basis) will help me to do this?

4

No. When electing cash basis, invoices are not recognized until paid.

1 Like
5

Have you looked at “Service tax payable” liability account in: Reports → Balance sheet → with

  • Accounting method : Cash basis
  • End of month comparator columns

Or Reports → Tax Summary / Taxable Sales per Customer

  • Accounting method : Cash basis
  • Period: Month of interest
1 Like
6

Thank you @Ealfardan, @Tut and @Patch,
your answers gave me some clear picture of how can I handle it easily.
What I’m going to do now is;
Create a report in cash basis( as you advised me above) end of the month to get the real payable easily,
Then I move that certain amount from “Tax payable account” to “Payable to customs account” through journal entry. and make payment accordingly.
Because my entire accounting is to be accrual basis,
But in my summery view, I want to see how much is really payable to the customs.
(maybe I’ll change the name of account “Tax payable” to “Tax payable suspense” and “Payable to customs” to “Tax payable”)
Thank you again all for your help.

1 Like
7

You missed an important point, @Shan. You won’t need the separate tax liability account. Just switch back and forth between accrual and cash basis.

Implement this in a test business to understand how it works.

1 Like
8

Thank you for your valuable advise @Tut,
I’ve tried it, It works as expected. thanks again.