tax

[Former Member]

hi,

1) if maintain the tax code in FTXP, the account defined is the tax account. which means during posting, the tax account defined will get posted when posting to the gl account which set for tax category, right?

2) when tax account defined in FTXP, we do not need to explicitly post to tax account but the system will automate the tax account posting, right?

3) may i know the tax account defined in point 1 is expense or payable?

4) i understand input tax is receivable and output tax is payable. so if in FTXP, if it is input tax code then it is receivable?

5) may i know if the set off value (output setoff input tax) will put in expense account?

thanks

[Former Member · Accepted solution]

> hi,

> 1) if maintain the tax code in FTXP, the account

> defined is the tax account. which means during

> posting, the tax account defined will get posted when

> posting to the gl account which set for tax category,

> right?

><b> - <b>Only input tax allowed

+ Only output tax allowed

• All tax types allowed </b> A GL account can be so configured that it can allow only input tax, only out put tax and it can also allow all taxes.</b>> 2) when tax account defined in FTXP, we do not need

> to explicitly post to tax account but the system will

> automate the tax account posting, right?

> <b>YES</b>> 3) may i know the tax account defined in point 1 is

> expense or payable?

> <b>If it is related to AP it will flow to input tax (Dr) ie BS item and if it is related to AR it will flow to payable (Cr) BS item</b>

> 4) i understand input tax is receivable and output

> tax is payable. so if in FTXP, if it is input tax

> code then it is receivable?

> <b>Though it is on the Dr side of the posting in strictest sense it is not receivable. You dont get this amount from any one. You can set off this amount against your payable.</b>> 5) may i know if the set off value (output setoff

> input tax) will put in expense account?

> I<b> am not able to understand this. can u elaborate this further</b>.

> thanks

[Former Member · Accepted solution]

hi,

thanks for reply.

1) "A GL account can be so configured that it can allow only input tax, only out put tax and it can also allow all tax"

may i know if it allows all tax then what gl account is this?

2) "Though it is on the Dr side of the posting in strictest sense it is not receivable. You dont get this amount from any one. You can set off this amount against your payable"

if it is not receivable in strictest sense, then can i say it is also payable but at dr side? anyhow, this inpu tax should be reported in 1 of the account group, right? so i wonder it should be in asset or liabilities in BS?

3) "may i know if the set off value (output setoff

input tax) will put in expense account?

I am not able to understand this. can u elaborate this further."

as what i understand, p&l only can be recognised. tax is an expense. so may i know eventually, the tax we pay to tax authority should be charged to expense account, right? the set off of the output against input will give the actual tax need to pay, so i wonder the set off balance should be charge to expense account.

[Former Member · Accepted solution]

> hi,

> thanks for reply.

>

> 1) "A GL account can be so configured that it can

> allow only input tax, only out put tax and it can

> also allow all tax"

>

> may i know if it allows all tax then what gl account

> is this?

> <b> - Only input tax allowed

+ Only output tax allowed

• All tax types allowed

Just to understand the configuration, go to FS00 enter any of the BS GL account and go to tab control data and place the curson in field tax category press F4. You can see the above values. If u enter - it will allow only input tax, if u enter + it will allow only output tax and if u enter * it will allow both type of taxes ie both input and out put.

</b>> 2) "Though it is on the Dr side of the posting in

> strictest sense it is not receivable. You dont get

> this amount from any one. You can set off this amount

> against your payable"

>

> if it is not receivable in strictest sense, then can

> i say it is also payable but at dr side? anyhow, this

> inpu tax should be reported in 1 of the account

> group, right? so i wonder it should be in asset or

> liabilities in BS?

> <b>It is an asset item. You will not get any amount from the government or from anyone. This amount you will use it to set off against tax payable. What I wanted to say here is in the case of tax payable if there is a balance amount after set off against the input tax you will be paying to the government. But in the case of output tax you will not receive money from the government and at the end of the period if there is any balance available it will be charged to the PL account depending upon the taxation policy of the government</b>

> 3) "may i know if the set off value (output setoff

> input tax) will put in expense account?

> I am not able to understand this. can u elaborate

> this further."

>

> as what i understand, p&l only can be recognised. tax

> is an expense. so may i know eventually, the tax we

> pay to tax authority should be charged to expense

> account, right? the set off of the output against

> input will give the actual tax need to pay, so i

> wonder the set off balance should be charge to

> expense account.

<b>This I will explain with an example.

COnsider the following amount of input tax and out tax for the month of September 2007.

Input tax -

---

Dr 24000

Output tax - Cr 34000

So the entry will be

Out put tax Dr 24000

Input tax Cr 24000

After this set off there will be a balance of 1000 to be paid to the government.

This entry will be

Input tax Dr 10000

Bank Cr 10000

So the balance in input tax and output tax will be zero at the end of Sep 2007.

Pl let me know if u have any questions.</b>

[Former Member · Accepted solution]

hi,

thanks for your reply. but i need to clarify 2 points only. i do not know if it is your typo error or i understand incorrectly.

1) "may i know if it allows all tax then what gl account

is this?"

what i wanted to ask is not the system allows what kind of tax. i wanted to know what gl account for 'all tax' in FTXP.

as we know, input tax is receivable account, output tax is payable account, so when come to 'all tax' (mix), what gl account assigned to it in FTXP.

2) in your example, after the setoff, my output tax has balance of CR 1000.

i should DR my output tax and not DR my input tax, right?

3) balance should be 1000 and not 10000, right?

4) if i have DR balance in my input tax means? i can reserve for next year set off with next year output tax?

Input tax -

---

Dr 24000

Output tax - Cr 34000

So the entry will be

Out put tax Dr 24000

Input tax Cr 24000

After this set off there will be a balance of 1000 to be paid to the government.

This entry will be

Input tax Dr 10000

Bank Cr 10000

So the balance in input tax and output tax will be zero at the end of Sep 2007.

[Former Member · Accepted solution]

> hi,

> thanks for your reply. but i need to clarify 2 points

> only. i do not know if it is your typo error or i

> understand incorrectly.

>

> 1) "may i know if it allows all tax then what gl

> account

> is this?"

>

> what i wanted to ask is not the system allows what

> kind of tax. i wanted to know what gl account for

> 'all tax' in FTXP.

> as we know, input tax is receivable account, output

> tax is payable account, so when come to 'all tax'

> (mix), what gl account assigned to it in FTXP.

<b>There are only types of GL accounts one is PL and tthe other is BS. This account will be a BS account. For any GL account you can post both Dr and Cr item. All tax means it will be a BS account which will allow both input tax and output tax from FTXP.</b>> 2) in your example, after the setoff, my output tax

> has balance of CR 1000. <b>This should be 10000</b>

> i should DR my output tax and not DR my input tax,

> right?

>

> 3) balance should be 1000 and not 10000, right?

>

>

> Input tax -

---

Dr 24000

>

> Output tax - Cr 34000

>

> So the entry will be

> <b>The following setoff entry will be passed at the end of the period. This is a setoff entry where the input tax will be adjusted against the output tax (tax Payable) </b>

> Out put tax Dr 24000

> Input tax Cr 24000

>

> After this set off there will be a balance of 10000 to

> be paid to the government.

> This entry will be

>

> Input tax Dr 10000

> Bank Cr 10000

>

> So the balance in input tax and output tax will be

> zero at the end of Sep 2007.

[Former Member · Accepted solution]

hi,

sorry, my mistake. it should be 10000.

1) it should DR output tax 10000 and not DR input tax 10000, right? in your example is Input tax Dr 10000

Bank Cr 10000

Input tax -

---

Dr 24000

Output tax - Cr 34000

2) if i have DR balance in my input tax after set off with output tax means? i can reserve for next year set off with next year output tax?

thanks

[Former Member · Accepted solution]

Hi

You can set off your tax payable only to the extent of the input tax available and any balance should be paid at the end of each period. In our example the output tax payable is 34000 and input tax available for set off is 24000 and the balance you have to pay to the tax authorities. If the amount is not paid you will be treated as a defaulter and liable to pay to penalty and interest.