You need to use this option whenever you wish to create a new Tax account or Tax code for VAT/GST/Sales Tax (Output Tax as well as Input Tax).
You may also change the descriptions of an existing account, change the percentages on your various tax types and percentages whenever the legislation is amended, or to delete an existing account.
The Tax codes and percentages, which apply for VAT/GST/Sales Tax, are prescribed by VAT/GST/Sales Tax or Tax Legislation and may be amended from time to time by the Tax Authorities.
Being registered for VAT/GST/Sales Tax, you will have two basic accounts, i.e. Output Tax that is charged when selling services or goods, and Input Tax when you purchase from another registered VAT/GST/Sales Tax vendor.
TurboCASH will have setup an Output VAT/GST/Sales Tax and an Input VAT/GST/Sales Tax account as sub-accounts of the VAT/GST/Sales Tax Control account as Current liabilities for you in the templates.
The Tax codes and percentages differ from country to country and you may be required to change the percentages and create new codes whenever the legislation changes.
English (Default language file) refers to Tax. If you select the American language file, it will refer to the Sales Tax:
It is of utmost importance that you create these codes and percentages correctly to suit your needs and the requirements of legislation applicable to your country. You have to create, or add the Tax accounts (Tax codes), which you will need to fill in your VAT/GST/Sales Tax return. TurboCASH will print the necessary Tax or VAT/GST/Sales Tax reports for your Tax codes.
These Tax codes, or Tax accounts, should be created as sub-accounts. Before you can create the Tax codes you need the following two General ledger accounts created in Action → Accounts:
1.VAT/GST/Sales Tax Control account - the main account which will be used as a totalling account for the Tax codes.
2.VAT/GST/Sales Tax Payments account - the sub-account which you need to allocate your Tax payable (as submitted on your VAT/GST/Sales Tax returns) when you make payments in the payments journal to the Tax Authorities.
In cases where the Input Tax is more than the Output Tax, you need to allocate the refunds received from the Tax Authorities in the receipts journal.
To create a new Tax account (Tax Code):
1.On the Action ribbon, select Accounts. The Accounts screen; listing your available accounts will be displayed.
2.Select the Tax Control account (as in this case, “G850-000 VAT Control account”).
2.Click on the (Add:Account) icon (or select the Add on the context menu). An entry for the new Ledger account is displayed (e.g. “G850 000 Account name” on the Account list. The Tax code is a Sub-account for the Tax main account (i.e. “VAT Control account”).
3.Enter or select the following:
a)Account type - Select “Tax account”.
b)Account No. - The Main account “850” is displayed and cannot be edited. Type “040” in the sub-account field.
c)Description - Replace Account name with the new Tax code description e.g. “Zero-rated VAT – 0%”.
d)Account group 1 - “Current liabilities” should be displayed. This is the Account group which is linked to the Main account.
e)Account group 2 - Select Account group 2, if not selected.
f)Type - “Balance sheet” should be displayed. This field cannot be selected, since the Main account is a Balance sheet account type.
g)Sub-accounts - This field cannot be selected, since this is a sub-account.
h)Status - “Enabled” (default) should be selected.
i)Open item account - “No” (default) should be selected.
j)Use link tax - “Empty” (default) should be selected.
4.Click on the Tax tab.
5.Enter the Percentage “14” for the applicable Tax code.
6.Use Link Tax - To be advised.
7.Show tax in documents - To be advised.
8.Click on the Save button. The account will automatically be placed in the correct structure of the Account list.
The icon will change from (Assets / Liabilities) to (Tax account).
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