AR Documents with VAT: To Process a Credit Memo

The following activity will walk you through the processing of a credit memo with VAT.

Story

Suppose that on January 30, 2024, SweetLife Fruits & Jams issued a $15 credit memo to EasyDiner Co. to give this customer a discount for the services purchased earlier. Acting as a SweetLife accountant, you need to create and process the $15 credit memo by applying it to an invoice issued for this customer.

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 defined.
  • On the Tax Zones (TX206000) form, the CANADA tax zone has been created.
  • On the Customers (AR303000) form, the EASYDINER customer account has been defined.

Process Overview

In this activity, on the Invoices and Memos (AR301000) form, you will create a credit memo and apply an AR invoice to it. After the release of the credit memo and the application, on the Journal Transactions (GL301000) form, you will review the GL transaction generated by the system.

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, make sure that the business date in your system is set to 1/30/2024. If a different date is displayed, click the Business Date menu button, and select 1/30/2024 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 Acumatica screen, select the SweetLife Head Office and Wholesale Center branch.
  4. 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.
  5. As a prerequisite activity, in the company to which you are signed in, be sure that you have created an AR invoice, as described in AR Documents with VAT: To Process an AR Invoice.

Step 1: Creating a Credit Memo

To create a credit memo, do the following:

  1. Open the Invoices and Memos (AR301000) 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: Credit Memo
    • Customer: EASYDINER
    • Date: 1/30/2024 (inserted by default)
    • Post Period: 01-2024
    • Description: $15 discount on services
  4. On table toolbar of the Details tab, click Add Row on the table toolbar, and specify the following settings in the added row:
    • Branch: HEADOFFICE
    • Ext. Price: 15
  5. On the form toolbar, click Save.
  6. On the Taxes tab, review the tax applied to the document.

    The customer is assigned to the CANADA tax zone, and the TAXABLE category is specified in the document line, so the system has applied the VAT tax to the credit memo. The calculated tax amount is $1.05. On release of the credit memo, the system will subtract the calculated tax amount from the accumulated output taxes, because credit memo amounts are included in the tax report with the negative sign.

Step 2: Applying an Invoice to the Credit Memo

To apply the previously created invoice to the credit memo, do the following:

  1. While you are still reviewing the credit memo on the Invoices and Memos (AR301000) form, go to the Applications tab.
  2. On the table toolbar, click Add Row, and specify the following settings for the added row:
    • Doc. Type: Invoice
    • Reference Nbr.: The invoice for the EASYDINER customer with a balance of $5,012.50
  3. In the Amount Paid column, specify 16.05, which is the Detail Total plus the Tax Total of the credit memo.

    After the credit memo is applied to the invoice, the invoice balance will be decreased by $16.05. The resulting invoice balance ($4,996.45) is shown in the Balance column for the application.

  4. On the form toolbar, click Remove Hold, and click Release to release the credit memo and its application to the invoice.
  5. On the Financial tab, click the Batch Nbr. link; on the Journal Transactions (GL301000) form, which opens, review the transaction generated for the credit memo.

    On release of the credit memo, the system generated the following entries:

    • The Accounts Receivable account of the customer (11000) is credited in the total amount of the credit memo (line amount plus tax amount) to decrease the customer's balance.
    • The Sales account (40000) is debited in the line amount to decrease the sales income.
    • The Tax Payable account of the tax (24100) is debited in the amount of calculated taxes to decrease the accumulated output tax.