At the time of posting entries in FI module, few transactions involve Tax calculation.

Below is the brief on how the Accounting keys and Tax code works at the time of postings.

 

1.     Account Key: NVP

 

 

 

  • NVP is determined to be input tax and it is done by assigning “2” to the Tax Type. (1- Output Tax, 2- Input Tax, 3- Additional tax, 4- Not relevant to tax)
  • Not Deductible option is checked in. This means that the tax amount is loaded to the inventory/asset and cannot be claimed at the time of tax payment to the govt.
  • Posting Indicator “3” means the tax percentage will be distributed to the respective revenue account/ expense account and not as separate line item.
  • If Not discount related is selected, the tax portion which is assigned to the corresponding transaction key is not taken into account in determining the cash discount base.

Expense amount serves as the base for tax calculation. The logic behind Expense Amount calculation is as follows:

Expense Amount: Prepaid Expense (100)/ 106(100%+6%)*100= 94.34.

Tax Amount: 94.34*6%= 5.66

For the tax code SR, the tax % for the account Key NVP is mentioned as 6%

As the posting indicator is “3” for NVP account key, the tax amount is not shown in a separate line item. Hence 100 (94.34+ 5.66) is posted to expense GL.

 

 

2.     Account Key: VST

 

 

  1. VST is determined to be input tax by assigning “2” to the Tax Type. (1- Output Tax, 2- Input Tax, 3- Additional tax, 4- Not relevant to tax)
  2. Not Deductible option is not checked in. The tax paid can be availed back by the government. Tax is not added to the inventory/ asset. It is shown as a separate line item and it can be cleared off later by the finance.
  3. Posting Indicator “2” means the tax percentage will not be distributed to the respective revenue account/ expense account and will be shown as separate line item.
  4. If Not discount related is selected, the tax portion which is assigned to the corresponding transaction key is not taken into account in determining the cash discount base.

 

Expense amount serves as the base for tax calculation. The logic behind Expense Amount calculation is as follows:

Expense Amount: Prepaid Expense (100)/ 114(100%+14%)*100= 87.72

Tax Amount: 87.72*14%= 12.28

For the tax code AB, the tax % for the account Key VST is mentioned as 14%

As the posting indicator is “2” for VST account key, the tax amount (12.28) is shown in a separate line item. 

 

3.     Account key: NVP and VST

 

 

                     

 

  1. VST is determined to be input tax by assigning “2” to the Tax Type. (1- Output Tax, 2- Input Tax, 3- Additional tax, 4- Not relevant to tax)
  2. Not Deductible option is not checked in. The tax paid can be availed back by the government. Tax is not added to the inventory/ asset. It is shown as a separate line item and it can be cleared off later by the finance.
  3. Posting Indicator “2” means the tax percentage will not be distributed to the respective revenue account/ expense account and will be shown as separate line item.
  4. If Not discount related is selected, the tax portion which is assigned to the corresponding transaction key is not taken into account in determining the cash discount base.

 

 

 

 

  1. NVP is determined to be input tax and it is done by assigning “2” to the Tax Type. (1- Output Tax, 2- Input Tax, 3- Additional tax, 4- Not relevant to tax)
  2. Not Deductible option is checked in. This means that the tax amount is loaded to the inventory/asset and cannot be claimed at the time of tax payment to the govt.
  3. Posting Indicator “3” means the tax percentage will be distributed to the respective revenue account/ expense account and not as separate line item.
  4. If Not discount related is selected, the tax portion which is assigned to the corresponding transaction key is not taken into account in determining the cash discount base.

 

 

Expense amount serves as the base for tax calculation. The logic behind Expense Amount calculation is as follows:

Expense Amount: Prepaid Expense (100)/ 111(100%+5% (VST) +6% (NVP))*100= 90.09

Tax Amount for VST: 90.09*5%= 4.50

Tax Amount for NVP: 90.09*6%= 5.41

For the tax code SQ, the tax % for the account Key VST is mentioned as 5% and 6% for NVP

As the posting indicator is “2” for VST account key, the tax amount (4.50) is shown in a separate line item.

As the posting indicator is “3” for NVP account key, the tax amount (5.41) is not shown in a separate line item. Hence 95.50 (90.09+ 5.41) is posted to expense GL.

 

 

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