Withholding Tax being negative in Suspense account

I have issues with recording Withheld tax on Manager… Withholding tax applied to Invoices shows negative amount on a suspense account. This is really confusing. Please, advise on how to properly record withholding tax.

Of course, the fact that your entry ended up in Suspense means you didn’t allocate to the intended account properly. Can you provide an example, possibly with screen shots, of a wayward transaction? Also, please clarify details about the withholding tax: is this on payments to suppliers, sales invoices to customers, or what? (The term is used differently in different tax jurisdictions. I think the only common aspect is that someone withholds something from someone. But who from whom and what varies. :wink: )

Thanks for your response…
It is a Withholding tax on sales invoices to customers…
However, I think the issue has been resolved. I had to create another account under Assets called Withheld Tax.
So, I used Journal Entry in posting the amount fro the suspense account into Withheld Tax account.
The I have all withheld Taxes on my invoices to customers recorded as Asset.
I hope I am right.

This is not correct. You should never use a journal entry to clear something from Suspense, because the fact that it is there means you entered something incorrectly. The journal entry just adds a bandage over the wound, but the wound festers underneath.

To help you, I need to know more about this withholding tax. Is it a tax on the sale owed by your company to a tax authority? Or is it a tax levied on the customer, for which you only act as collection agent for the authority? Either way, you should probably be using a tax code under Settings. There may be a built-in code for your jurisdiction, or you may have to construct a custom tax code. Read about them starting here: Manager Cloud. When you invoke a tax code, Manager will create an automatic liability account, Tax payable, to catch it.

Tax you owe to a tax authority is not an asset, either. It is a liability. So if I understand what you did, you need to get rid of that account (after deleting all transactions in it) and make use of the tax codes features in Manager.

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I’m interested how the withholding tax amount ended up in Suspense account. @Tut is right, don’t fix issues in Suspense account by journal entries.

If you like, you can send me your accounting file to lubos@manager.io and I can have a look further.

Thanks you for your help @Tut and @lubos.

Also, I will like to be enlightened on the use of (non-inventory cost into production) in the production order. I suppose this is meant for recording other cost involved in manufacturing inventory items. E.g Cost of transportation, labour, etc. Pls, shed more light.
Thanks in anticipation

Basically, this feature gives you the opportunity to build into the cost price of the Finished Item any expenses which you want to consider as inputs into its production cost. Labour used in the actual production is an obvious one, but what other expenses to incorporate is entirely a management decision.

Transportation costs relating to any Bill of Material inventory items would generally be allocated during the processing of those Inventory Items Purchase Invoice. Transportation of the Finished Item could be an added on Delivery Fee

@Brucanna thanks for your response… However, the non-inventory cost I added to my production order add up as a credit on my expense account after I created a Labor Account under expenses.
Is this suppose to be so?

Yes, when you first take up the expense it puts a debit into the expense account. When you add that expense item to a production order via a non-inventory cost then that expense amount is deducted (credited) from the expense account and added into the inventory item which the production order is creating

I am confused… Am I supposed to have added the cost to my expense account (spend money for labor) before adding it to my non-inventory cost on production order? Sorry for my troubles, pls.

Yes, if the expense doesn’t exist then you don’t have a cost which can be added (recovered) via the production order.

If you tried to add a non-inventory cost to a production order which doesn’t actually exist, you would be creating an artificial profit in the P&L

@Brucanna Thanks so much… That has made sense to me now. Really appreciate.

i think i can add clarification on this subject ; i also want to know how to handle withholding tax on sales invoice ;
the thing is , in my case / country , this is the tax that will be deducted directly by your customer when paying your invoice and you wont get it , but when closing a financial year will submit all tax certificates and get refunded your money by the tax authority , so it becomes liability to them , and an asset to you but unless you get it from Tax authority , then it is nothing to you ;
and in my country , this has two different %, e.g if it is a service then 5%, and if it is on Goods then 2%, , so when and how do i handle these withholding tax ?
Remember this cant be handled by Tax payable account , because you don’t have control , only your customer will take it from you and submit it to the Tax Authority ,

I suggest you set up a test company in Manager to make some trial entries to see how withholding tax works. It is somewhat complex. Follow this Guide: Manager Cloud. (The Guide did not exist when previous postings in this thread were written.)

You will encounter a complication when you have invoices mixing goods and services, because Manager only allows a single withholding rate or amount to be applied. There are two possible solutions:

  1. Raise separate invoices for services and goods, applying different rates to each. At first, this might seem like extra work, but it will avoid manual calculations. More importantly, it will help your customers see exactly what they are withholding tax for and simplify their accounting. And it will be easy to explain what you have done to auditors, accountants, or tax agents.

  2. Raise a single sales invoice, but manually calculate an effective percentage or a total withholding amount based on the mix of goods and services on the invoice. This will limit you to a single invoice per sale, but will make accounting and understanding of the transaction more complex for everyone.

You can handle this using the in built-in withholding tax tool that let you record withholding tax on invoices . It very cool because you can readily see the withholding tax receivable (tax credit certificates receivable) on the customer tab.

You can also handle this with Receive Money / Receipt.

Create accounts (Asset Accounts) and name them withholding tax receivable 2% and Withholding tax receivable 5%.

Create none inventory items directing/linking them to these accounts

WHT 2% (link to withholding tax receivable 2% a/c)
WHT 5% (link to withholding tax receivable 5% a/c)

Put in the correct descriptions.

On the receive money form

Add a line and select appropriate items
(WHT2% / WHT5%)

Enter a negative number (applicable WHT) in the amount field (which you have calculated correctly)

Manager will debit the asset account while effecting the deduction on the payment.
If you do it right it works perfectly.

You can later export the content of the asset accounts which you can sort by customer names (Contact) and demand for tax certificates from them

In my country WHT law comes into effect during payment and not invoicing.
So if you want to know when I think it the time I would say the payment stage.

But the feature in manager is very very nice and advanced and helps you to monitor the WHT receivable smoothly.
Your choice

With my style, you don’t have to raise separate invoices. You can always insert a line and enter the appropriate tax there during payment.

Thank you very much for your prompt reply ,

I have seen the inbuilt feature , but the thing is it calculate withholding tax based on total amount , and not on subtotal amount , meaning it take withholding tax on vat inclusive amount , which is not correct at all ,

Otherwise the inbuilt feature is very cool and simple to use ;

Would you change that to use subtotal amount instead of vat inclusive amount ?

You can either choose a percentage rate or enter an amount.

I complained to @lubos the current WHT feature applies tax on Tax which isnt so in all the countries I know and my country.But I guess the option to use the percentage or the amount solves it.

Taxation in my country is not that formalised, many small business don’t submit tax returns and hardly obey withholding tax because they don’t pay tax and so find no use for WHT credit , so you wouldn’t want to reduce your cash receivable on your sales invoice by applying WHT, they wont even pay to the tax man.

You leave it to the customer to apply and then you edit your invoice to reflect it. After all the law puts the burden on the payer to apply WHT not the payee.

However in a big company or a company with a lot of transactions, there wouldn’t be time to be editing invoices after customers pay. So effect the WHT at the receive money stage like i suggested. BUT you wouldnt know the WHT receivable from customers readily and tracking the WHT receivable can get messy if you have many customers.