AP Documents with VAT: To Process an AP Bill

The following activity will walk you through the process of processing an AP bill with VAT.

Story

Suppose that on January 30, 2023, SweetLife Fruits & Jams received three hours of advertising and one hour of billboard installation services from MapleLeaf Ads Co. The advertising services are subject to VAT and the installation services are VAT-exempt. The needed VAT and VAT exempt taxes have been already created in the system. Acting as a SweetLife accountant, you need to process an AP bill in the system.

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 Tax Categories (TX205500) form, the TAXABLE tax category has been configured.
  • On the Tax Zones (TX206000) form, the CANADA tax zone has been configured.
  • On the Taxes (TX205000) form, the VAT tax has been configured and assigned to the TAXABLE category and the CANADA tax zone.
  • On the Vendors (AP303000) form, the MAPLELEAF vendor account has been configured.
  • On the Non-Stock Items (IN202000) form, for the ADVERT item, the TAXABLE category has been selected in the Tax Category box on the General tab. For the BILLBINSTA item, the EXEMPT category has been selected in the Tax Category box.

Process Overview

In this activity, you will first update the settings of the vendor on the Vendors (AP303000) form by specifying a tax zone for the vendor. On the Bills and Adjustments (AP301000) form, you will create an AP bill with two lines—with the TAXABLE and EXEMPT categories. After the release of the bill, you will review the GL transaction on the Journal Transactions (GL301000) form.

System Preparation

To prepare the system, do the following:

  1. Launch the MYOB Advanced 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 Advanced screen, make sure that the business date in your system is set to 1/30/2023. If a different date is displayed, click the Business Date menu button, and select 1/30/2023 on the calendar. For simplicity, in this activity, you will create and process all documents in the system on this business date.
  3. On the Company and Branch Selection menu, on the top pane of the MYOB Advanced screen, select the SweetLife Head Office and Wholesale Center branch.
  4. As a prerequisite activity, be sure you have assigned the TAXABLE tax category to the ADVERT non-stock item as described in Tax Zones and Categories: To Create a Tax Category and Tax Zone for VAT.
  5. As a prerequisite activity, in the company to which you are signed in, be sure you have configured a value added tax as described in Value-Added Taxes: To Create a General VAT and Exempt VAT.

Step 1: Updating the Vendor's Settings

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

  1. Open the Vendors (AP303000) form.
  2. In the Vendor ID box, select MAPLELEAF.
  3. On the Purchase Settings tab, select CANADA in the Tax Zone box.
  4. On the form toolbar, click Save.

Step 2: Creating and Releasing an AP Bill

To create and release an AP bill, do the following:

  1. Open the Bills and Adjustments (AP301000) form.
    Tip: To open the form for creating a new record, type the form ID in the Search box, and on the Search form, point at the form title and click New right of the title.
  2. On the form toolbar, click Add New Record.
  3. In the Summary area, specify the following settings:
    • Type: Bill
    • Vendor: MAPLELEAF
    • Date: 1/30/2023 (inserted by default)
    • Post Period: 01-2023
    • Description: Advertisement 3 hours and support 1 hour
  4. On table toolbar of the Details tab, click Add Row and specify the following settings for the added row:
    • Branch: HEADOFFICE
    • Inventory ID: ADVERT
    • Quantity: 3
    • Unit Cost: 150
    • Tax Category: TAXABLE (inserted by default)
  5. Click Add Row again and specify the following settings for the second row:
    • Branch: HEADOFFICE
    • Inventory ID: BILLBINSTA
    • Quantity: 1
    • Unit Cost: 100
    • Tax Category: EXEMPT (inserted by default)
  6. On the form toolbar, click Save.
  7. On the Taxes tab, review the taxes that have been applied to the bill.

    The CANADA tax zone, which is specified as the Tax Zone of the vendor, includes the VAT and VATEXEMPT taxes. The ADVERT item belongs to the TAXABLE tax category, which contains the VAT tax. Therefore, the VAT tax, which is assigned to both the tax category and the tax zone, is applied to the ADVERT document line.

    The VATEXEMPT tax does not belong to the TAXABLE category, so it is not applied to the ADVERT document line. Similarly, the VATEXEMPT tax, which is assigned to both the EXEMPT tax category and the CANADA tax zone, is applied to the BILLBINSTA document line. The VAT tax does not belong to the EXEMPT category, so it is not applied to the BILLBINSTA document line. The taxable amount is $450.00 (VAT Taxable Total), and the tax-exempt amount is $100.00 (VAT Exempt Total). The total tax calculated for the bill is $31.50.

  8. On the form toolbar, click Remove Hold and click Release to release the bill.

Step 3: Reviewing the GL Transaction

To review the GL transaction generated by the system, do the following:

  1. While you are still reviewing the bill on the Bills and Adjustments (AP301000) form, open the Financial tab.
  2. Click the Batch Nbr. link and review the GL transaction that opens on the Journal Transactions (GL301000) form.

    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 Expense accounts of the non-stock items (61000) are debited in the appropriate line amounts.
    • The Tax Claimable account of the tax (17000) is debited in the amount of the calculated taxes to record the amount to be claimed from the tax agency.