Purchases with Sales Taxes: Tax Amount Validation
According to legal rules and requirements, all amounts—such as total amount, tax amount, and taxable amount—of a document that you enter into the system must exactly match the corresponding amounts specified in the source (original) document received from the vendor. To help you ensure that correct tax amount is specified in the document that you enter in the system manually, MYOB Acumatica provides you with a validation function. With this function, you can enter the control tax amount into a document, which the system validates.
To make the Tax Amount box available in the summary area of the document entry form, you need to select the Validate Tax Totals on Entry check box on the preferences form of the corresponding module:
- Accounts Payable Preferences (AP101000) form: To make the tax amount validation box available on the Bills and Adjustments (AP301000) and Cash Purchases (AP304000) forms
- Cash Management Preferences (CA101000): To make the tax amount validation box available on the Cash Transactions (CA304000) form
With this check box selected, after you have added all the required detail lines in a document, the system will compute the tax amount according to the tax settings applicable to a document and validate this amount against the tax amount specified in the validation box.
If there is a discrepancy between the tax amount that you have entered in the Tax Amount box and the tax amount computed by the system (that is shown in the Tax Amount column on the Tax Details tab), the system does not allow you to process the document until you correct the tax amount. In that case, you correct the tax amount manually on the Tax Details tab.
Tax Amount Discrepancies
Some discrepancies can appear between the tax amount computed by the system on the document entry form and the tax amount specified in the original vendor document. These discrepancies may be caused due to rounding differences—for example, when the tax amount of the original document was calculated in another system in which the rounding rules are set up differently. The discrepancies can be minor differences in decimals, but nevertheless they should be corrected.
If any discrepancy arises and the system shows the corresponding error, you manually correct the tax amount in the Tax Amount column of the Tax Details tab so that it matches the tax amount of the vendor document. In that case, if the Net tax calculation method has been applied, all the amounts in the document will be exactly the same as in the source document (after you correct the tax amount manually) and the document will be balanced. If the Gross tax calculation method has been applied, the taxable amounts used by the system for tax amount calculation can differ slightly from the taxable amounts used for the original document. In that case, the discrepancy (the amount of the difference) that has occurred will be accounted and posted to the corresponding GL account. Thus, as a result, the document will contain exactly the same amounts as the source document, but the amount that has appeared due to rounding differences, will be accounted on the respective GL account:
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable account | 0.00 | Total Amount |
| Expense account (Line 1) | Amount1 | 0.00 |
| Expense account (Line 2) | Amount2 | 0.00 |
| Tax Payable account | Tax Amount | 0.00 |
| Rounding Gain/Loss account | Discrepancy Amount (the difference due to the rounding amount) | 0.00 |
To account for the discrepancy amount, you need to specify the maximum amount of the difference that can appear due to rounding in the Rounding Limit box on the General Ledger Preferences (GL101000) form. The system will validate this amount against the discrepancy amount, and if the discrepancy amount does not exceed the limit, the discrepancy amount will be posted to the GL accounts specified in the Rounding Gain Account/Subaccount box or the Rounding Loss Account/Subaccount box on the General Ledger Preferences form.
Tax-Exclusive and Tax-Inclusive Amounts in Document Detail Lines
Before entering amounts in the detail lines of a document that you enter into the system, you must consider the type of amounts specified in the original vendor document. Depending on the business requirements of the applicable vendor, a document can contain in its detail lines amounts that are either tax-inclusive (net) or tax-exclusive (gross). In MYOB Acumatica, you need to specify the tax calculation mode that the system should use during the validation process. The selected mode defines how the system will compute the tax and taxable amounts for the document.
You select the required mode in the Tax Calculation Mode box (which can be found on several forms, as described below), in which the following options are available:
- Gross: Select this option if the amounts in the document detail lines include applicable taxes.
- Net: Select this option if the amounts in the document detail lines do not include taxes.
- Tax Settings: Select this option if the standard tax settings should be applied to the document. This option is used if a tax with one of the following tax calculation methods selected in the Calculation Rule box on the Taxes (TX205000) form is applied to the document: Compound Line-Level, Exclusive Document-Level, and Compound Document-Level. For details about these methods, see Tax Calculation Methods: General Information.
The Tax Calculation Mode box is specified on the following levels by using the appropriate forms:
- Document: You select the appropriate option on the Details tab of the document entry form. This option will be applied for computing tax and taxable amounts in this document. By default, the system fills in this box with the option specified for the vendor location (if applicable) or vendor that you specify for the document, but you can override the default option.
- Vendor Location (if applicable): You select the appropriate option on the General tab of the Vendor Locations (AP303010) form. (By default, the system fills in this box with the option specified for the vendor, but you can override this option.) This setting will be applied by default to all documents in which you select this vendor location, but it can be changed for each document.
- Vendor: You select the appropriate option on the Purchase Settings tab of the Vendors (AP303000) form. (By default, the system fills in this box with the option specified for the vendor class, but you can override this option.) This setting will be applied by default to all documents created for this vendor (if the option is not changed at the vendor location or document level).
- Vendor Class: You select the appropriate option on the General tab of the Vendor Classes (AP201000) form. This setting will be applied by default to all documents created for vendors of this vendor class (if the option is not changed at the vendor, vendor location, or document level).
For details on how default values work in the system, see Vendors: Vendor Locations and Vendors: Vendor Defaults and Overrides.
One-Line Document and Multiline Document
To speed the process of entering data on a document entry form, the system suggests a possible amount in each line that you add. For example, when you add the first line, the system automatically inserts in the Ext. Cost column of the line the amount that you have entered in the amount validation box in the summary area of the document entry form.
The suggested amount is exactly the same as the control amount you have entered (if the Gross tax calculation mode is specified for a document), or this amount is recalculated according to the rate of the applied tax or taxes—that is, the amount minus the applicable tax amounts (if the Net tax calculation mode is specified). You leave the Ext. Cost amount as it is if the document has only one line.
If the document has multiple lines, you manually correct the first Ext. Cost amount on the document entry form based on the amount specified in the first line of your source document. When you add the second detail line, the system suggests the residual amount (the difference between the total document amount and the amount that you have specified in the first line) in the Ext. Cost column of the second line; correct this amount if needed. The process proceeds similarly for any additional lines that you need to add. You can leave the suggested amount or correct it.
After you have added all required detail lines to the document entry form, the system compares the tax amount (or amounts) computed on the Taxes tab to the control value you have entered in the Tax Amount validation box of the form. The document is balanced if the tax amounts are the same; the system generates an error if there is any discrepancy.