Invoices with Sales Taxes: Process Activity
This activity will walk you through the process of creating and releasing an AR invoice with a sales tax.
Story
Suppose that on February 5, 2023, the head office of the SweetLife Fruits & Jams company provided a video course and two hours of support services to Morning Cafe. Acting as a SweetLife accountant, you have to process the corresponding invoice and analyze how the system applies taxes to invoices.
Configuration Overview
In the U100 dataset, the following tasks have been performed for the purposes of this activity:
- On the Tax Categories (TX205500) form, the TAXABLE and EXEMPT tax categories have been configured.
- On the Tax Zones (TX206000) form, the NYSTATE tax zone has been configured.
- On the Taxes (TX205000) form, the NY State Tax has been configured and assigned to the TAXABLE category and the NYSTATE tax zone. The New York Exempt tax has been configured and is assigned to the EXEMPT tax category and the NYSTATE tax zone.
- On the Non-Stock Items (IN202000) form, the VIDEOGUIDE item has been configured and assigned to the TAXABLE category.
- On the Customers (AR303000) form, the MORNINGCAF customer account has been configured, and the NYSTATE tax zone has been specified for the customer on the Shipping tab of this form.
- On the Vendors (AP303000) form, the NYTAXDEP vendor has been configured as a tax agency.
Process Overview
In this activity, you will create an invoice on the Invoices and Memos (AR301000) form, adding two lines to it—one line with a taxable non-stock item and the other line with tax-exempt support services. On the Taxes tab, you will review the taxes applied to the invoice automatically. You will then release the invoice and review the GL transaction generated by the system on the Journal Transactions (GL301000) form.
System Preparation
Before you begin to work with taxable AR invoices, do the following:
- Launch the MYOB Advanced website, and sign in to a company with the U100 dataset preloaded. To
sign in as an accountant, use the following credentials:
- Username: johnson
- Password: 123
- In the info area, in the upper-right corner of the top pane of the MYOB Advanced screen, click the Business Date menu button and select 2/5/2023. For simplicity, in this process activity, you will create and process all documents in the system on this business date.
- On the Company and Branch Selection menu, also on the top pane of the MYOB Advanced screen, make sure that the SweetLife Head Office and Wholesale Center branch is selected. If it is not selected, click the Company and Branch Selection menu button to view the list of branches that you have access to, and then click SweetLife Head Office and Wholesale Center.
Step 1: Creating and Releasing an Invoice with a Sales Tax
To create and release an AR invoice with a sales tax applied to it, proceed as follows:
- 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.
- Click Add New Record on the form toolbar, and specify the
following settings in the Summary area:
- Type: Invoice
- Customer: MORNINGCAF
- Terms: 30D (inserted by default based on the selected customer)
- Date: 2/5/2023 (the current business date, which is inserted by default)
- Post Period: 02-2023 (inserted by default based on the selected date)
- Description: Video training
- On the Details tab, click Add Row,
and specify the following settings in the added row:
- Branch: HEADOFFICE
- Inventory ID: VIDEOGUIDE
- Transaction Descr.: Video Training Course
- Quantity: 1
- Click Add Row, and specify the following settings in the
added row:
- Branch: HEADOFFICE
- Transaction Descr.: Support services
- Quantity: 2
- Unit Price: 10
- Tax Category: EXEMPT
For each line of the invoice, by default, the system uses the tax category of the non-stock item (as is the case with the first invoice line) or of the applicable tax zone if no inventory item is specified in the line. You can override the default tax category, if needed.
- On the form toolbar, click Save.
- On the Financial tab, review the Customer Tax Zone box, in which the NYSTATE tax zone is specified. The taxes of the NYSTATE tax zone are now applied to the taxable line of the invoice.
- On the Taxes tab, review the taxes that were applied to
the invoice.
The VIDEOGUIDE item belongs to the TAXABLE tax category, which contains the NYSTATETAX tax. The NYSTATE tax zone, which includes the NYSTATETAX tax, is specified for the document. Thus, the NYSTATETAX tax, which is assigned to the both the tax category and the tax zone, is applied to the invoice line. The taxable amount is $145.00 and the calculated total tax is $12.87.
The NYNOTAX tax does not belong to the TAXABLE category, so it is not applied to the first line of the invoice. Similarly, the NYNOTAX tax, which is assigned to both the EXEMPT tax category and the NYSTATE tax zone, is applied to the second line of the invoice. The NYSTATETAX tax does not belong to the EXEMPT category, so it is not applied to the second line of the invoice. The tax-exempt amount is $20.00.
- On the form toolbar, click Remove Hold, and then click Release to release the invoice.
Step 2: Reviewing the GL Transaction Generated on Invoice Release
To review the GL transaction that was generated when the system released the invoice, proceed as follows:
- While you are still viewing the AR invoice on the Invoices and Memos (AR301000) form, on the Financial tab, click the Batch Nbr. link.
- On the Journal Transactions (GL301000) form, which is opened, review
the transactions that were generated on release of the invoice as follows:
- The Accounts Receivable account of the customer (11000) is debited in the total amount of the invoice (the total of all lines plus the total of the calculated taxes).
- The Sales Revenue account (40000) is credited in the amount specified in the document lines.
- The Tax Payable account specified for the tax (24100) is credited in the calculated tax amount.