Applying a Pending VAT: To Apply a Pending VAT to an AP Bill with Multiple Installment Credit Terms

The following activity will walk you through the process of AP documents with multiple installment credit terms, to which pending VAT is applied. You will also recognize pending VAT on payments.

Story

Suppose that on March 10, 2024, SweetLife Fruits & Jams purchased advertising services from MapleLeaf Ads. Co for the total amount of $4,800, excluding a pending VAT. The vendor agreed to be paid in three equal installments. A SweetLife accountant created an original bill for the total amount of $5,136. On March 17, SweetLife paid one child bill for the amount of $1,712 and on March 24, the company paid the second child bill for the amount of $1,712. The tax amounts calculated on these bills need to be recognized on the payment dates, based on the payment amounts.

Acting as a SweetLife accountant, you need to create the original bill that will produce three child bills after its release, create the two payments for the child bills, recognize the VAT amounts, and prepare and release a tax report for March 2024.

Configuration Overview

In the U100 dataset, the following configuration tasks have been performed to prepare the system for this activity to be performed:

  • On the Enable/Disable Features (CS100000) form, the VAT Reporting feature has been enabled.
  • On the Vendors (AP303000) form, the MAPLELEAF vendor has been configured.
  • On the Credit Terms (CS206500) form, the Multiple Installments credit terms has been configured.
  • On the General Ledger Preferences (GL102000) form, the Require Ref. Numbers for GL Documents with Taxes check box has been selected.

Process Overview

In this activity, you will first update the settings of the needed vendor on the Vendors (AP303000) form. On the Bills and Adjustments (AP301000) form, you will process the original AP bill with multiple installments credit terms and make sure that three child bills are generated by the system. On the Checks and Payments (AP302000) form, you will pay two child bills. On the Recognize Input VAT (TX503500) form, you will recognize the pending input VAT for the 03-2024 period and review the generated transactions on the Journal Transactions (GL301000) form. On the Prepare Tax Report form, you will prepare a tax report for the 03-2024 tax period and review the pending VAT amount on this report. You will then release the tax report on the Release Tax Report (TX502000) form. Finally, you will reconcile the balances of the Pending Tax Claimable account in the general ledger and the taxes subledger by running the VAT Pending Recognition (TX631000) report.

System Preparation

To prepare the system, do the following:

  1. Launch the MYOB Acumatica website, and sign in to a company with the U100 dataset preloaded. You should sign in as an accountant by using the johnson username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, set the business date in your system to 3/10/2024.
  3. On the company and branch selection menu, on the top pane of the MYOB Acumatica screen, select the SweetLife Head Office and Wholesale Center branch.
  4. As a prerequisite activity, be sure that you have created the CANADA tax zone on the Tax Zones (TX206000) form as described in Tax Zones and Categories: To Create a Tax Category and Tax Zone for VAT.
  5. As a prerequisite activity, be sure that you have configured the VATVAR tax agency as described in Tax Report Configuration: To Create a Tax Report for VAT Variations.
  6. As a prerequisite activity, be sure that you have configured a tax report on the Reporting Settings (TX205100) form and have added reporting groups to the tax report. For details, see Tax Report Configuration: To Create a Tax Report for VAT Variations.
  7. As a prerequisite activity, in the company to which you are signed in, be sure you have configured a pending VAT as described in Value-Added Taxes: To Create a Pending VAT.

Step 1: Updating the Vendor's Settings

To update the settings of the MAPLELEAF vendor, do the following:

  1. On the Vendors (AP303000) form, open the MAPLELEAF vendor.
  2. On the Financial tab, select MULTINST in the Terms box.
  3. On the Purchase Settings tab, select CANADA in the Tax Zone box.
  4. On the form toolbar, click Save.

Step 2: Processing the Original AP Bill

To create and release an AP bill with multiple installments credit terms, to which the pending VAT is applied, do the following:

  1. On the Bills and Adjustments (AP301000) form, add a new record.
  2. In the Summary area, specify the following settings:
    • Type: Bill
    • Vendor: MAPLELEAF
    • Terms: MULTINST (inserted by default)
    • Date: 3/10/2024 (inserted by default)
    • Post Period: 03-2024
    • Description: Advertising services
  3. On the Details tab, click Add Row on the table toolbar and specify the following settings for the added row:
    • Branch: HEADOFFICE
    • Transaction Descr.: Advertising services
    • Ext. Cost: 4800
    • Account: 81000 (Other Expenses)
    • Tax Category: PENDING
  4. On the form toolbar, click Save.
  5. Review the Taxes tab. The calculated pending VAT is $336. This tax amount will be posted to the Pending Tax Claimable account on release of the bill.
  6. On the form toolbar, click Remove Hold and click Release to release the bill.
  7. On the Financial tab, click the Batch Nbr. link and on the Journal Transactions (GL301000) form, which opens, review the generated GL transaction. On release of the bill, the system generated the following entries:
    • The Accounts Payable account of the vendor (20000) is credited in the total amount of the bill (the line amount plus the calculated tax).
    • The Expense account specified in the bill line (81000) is debited in the amount specified in the document line.
    • The Pending Tax Claimable account (17500) is debited in the calculated tax amount.
  8. Open the Bills and Adjustments (AP3010PL) list of records. In the list, locate three child bills that the system has created on release of the original bill.

Step 3: Paying Two Child Bills

To pay two child bills, do the following:

  1. On the Checks and Payments (AP302000) form, create a new record.
  2. In the Summary area, specify the following settings:
    • Type: Payment
    • Vendor: MAPLELEAF
    • Application Date: 3/17/2024
    • Application Period: 03-2024
    • Payment Method: WIRE
    • Cash Account: 10200WH
    • Description: First installment
    • Payment Amount: 1712
  3. On the Documents to Apply tab, click Add Row and specify the following settings for the added row:
    • Document Type: Bill
    • Reference Nbr.: The reference number of a $1,712 bill with the Due Date of 3/17/2024
  4. On the form toolbar, click Remove Hold and click Release to release the payment.
  5. On the Bills and Adjustments (AP301000) form, open the second $1,712 bill. The bill should have the 3/24/2024 due date.
  6. On the form toolbar, click Pay.
  7. On the Checks and Payments form, which opens, update the settings in the Summary area as follows:
    • Application Date: 3/24/2024
    • Payment Method: WIRE
    • Cash Account: 10200WH
    • Description: Second installment
  8. On the form toolbar, click Remove Hold and click Release to release the second child bill.

Step 4: Recognizing the Pending Input VAT

To recognize the pending input VAT, do the following:

  1. Open the Recognize Input VAT (TX503500) form.
  2. In the Summary area, specify the following settings:
    • Date: 3/31/2024
    • Company/Branch: SWEETLIFE
    • Tax Agency: VATVAR

    The payment applications to bills subject to pending input VAT with an application date not later than 3/31/2024 are loaded to the form. Both payments of child bills that you have processed earlier are listed on the form. The Tax Amount column shows the amounts that can be recognized:

    • The amount of the first payment applied to the bill is $1,712. This amount includes the tax, so the taxable amount is $1,600 and the pending tax amount to be recognized is $112.
    • The amount of the second payment applied to the bill is also $1,712, the taxable amount is $1,600, and the pending tax amount to be recognized is $112.
  3. In the table, enter AP000196 in the Tax Doc. Nbr column for both lines.
  4. Select the unlabeled check box for both lines. The Total Tax Amount box in the Summary area shows $224 ($112 + $112).
  5. On the form toolbar, click Process to recognize the taxes for the selected documents.
  6. In the Processing dialog box, click the links in the Batch Number column and review the generated GL transactions on the Journal Transactions (GL301000) form. When the pending VAT was recognized, the system generated two GL transactions with the following entries:
    • The Pending Tax Claimable account (17500) is credited in the recognized tax amount to increase the pending VAT.
    • The Tax Claimable account (17000) is debited in the recognized tax amount to decrease the tax amount to be paid to the agency.

Step 5: Preparing and Releasing a Tax Report for the 03-2024 Period

Before you can prepare and release a tax report for 03-2024, you have to void the previously released tax report for 03-2024. Do the following:

  1. Open the Release Tax Report (TX502000) form.
  2. In the Summary area, specify the following settings:
    • Company: SWEETLIFE
    • Tax Agency: VATVAR
    • Tax Period: 03-2024 (selected automatically)
  3. On the form toolbar, click Void Report. The system voids the report and opens the Prepare Tax Report (TX501000) form.
  4. In the Summary area, make sure that the following settings are specified:
    • Company: SWEETLIFE
    • Tax Agency: VATVAR
    • Tax Period: 03-2024
  5. On the form toolbar, click Prepare Tax Report.
  6. On the Release Tax Report form, which opens, review the prepared tax report. The pending VAT amount that has been recognized is displayed in the tax report in the Pending Input VAT line.
  7. On the form toolbar, click Release to release the tax report for 03-2024.
  8. On the AP Documents tab, click the link in the Reference Nbr. column in the line with the $161.85 amount, and on the Bills and Adjustments (AP301000) form, which opens, review the generated document. On release of the tax report, the system created the debit adjustment because the Tax Claimable amount exceeds the Tax Payable amount by $161.85, which has to be returned to SweetLife.

Step 6: Reconciling the Balance of the Pending Tax Claimable Account

To reconcile the balance of the Pending Tax Claimable account in the general ledger and the taxes subledger, do the following:

  1. Open the Account Summary (GL401000) form.
  2. In the Summary area, specify the following settings:
    • Company/Branch: SWEETLIFE
    • Ledger: ACTUAL
    • Period: 03-2024

    The Pending Tax Claimable account (17500) has a beginning balance of $0 and an ending balance of $112, which is the amount of pending VAT that was not yet recognized.

  3. Open the VAT Pending Recognition (TX631000) form.
  4. On the Report Parameters tab, specify the following settings:
    • Report Format: Input VAT
    • Company/Branch: SWEETLIFE
    • Financial Period: 03-2024
  5. On the form toolbar, click Run Report.

    For the 17500 account, the report displays the only bill that has an unrecognized input VAT amount (of $112) at the end of the specified period. At the end of the 03-2024 period, the total amount of unrecognized taxes for the bills subject to pending input VAT equals the ending balance of the Pending Tax Claimable account (17500) in the general ledger; thus, the balances for the 03-2024 financial period are reconciled.