Hi
In my country part of the tax is paid on february the following year - i ussue a cheque to the inland revenue department and use category - government tax (other expenses). My accounting is requesting that this entry shows up in the year the tax applies to. How can i acheive that without inserteing a wrong transection in my bank current account.
Ken
You will need to create an accrual (sundry creditor) for the amount that is applicable to 2011. To do this you will need to create a General Journal viz:
DR Taxation Charge
CR Accrual
This entry will be dated (very important) within 2011 (probably 31 December).
Then to pay the amount you do the following:-
DR Accrual (with the amount applicable to the prior year)
DR Taxation charge (with the remaining amount)
CR Bank Account with the total amount
This transaction will be dated with the date of payment.
The result is that the accrual will be zeroed and the proportion applicable to 2012 will be charged to the current year's profit.
Hi
Thanks for your response - yet i am still a basic user and i didn't much get what i need to do.
Can you made give me some more detail how to do this? Can this be done in simplesart or do i need to Pro version?
Ken
To create a journal in SimpleStart, goto Company/For your Accountantt/Make General Journal Entries. Then you can post the journal entries as I have described, entering each element on a single line of the journal. Quick Books will not allow you to save the journal if the total Debits do not equal the total Credits.
Hi
I am trying to figure out the sense of this.
From the entries you gave me i see that DR Taxation charge - applies to remaining amount - yet there is no remaining amount.
I paid e,g, 100Euro of tax for year 2011. This tax i issued a cheque on jan 15th of 2012. So i already made an entry in the current cheque account of the cheque on the 15th January 2012.
So its the full 100 Euro that apply to 2011. I haven't paid any tax for 2012 yet. I would like to have the 100 Euro show up in the profit and loss of 2011 not of 2012, yet still leave the entry in my current account to leave my bank accounts in order.
Not sure if i am explaining myself well
Ken
When you create the taxation charge, you should have created the following journal (dated as I originally said) within the 2011 financial year. If we assume that the financial year-end is 31 December, then the date for this journal can be 31/12/2011.
DR Taxation Charge (P&L) with (say) €100.
CR Sundry Creditors (Liability) with €100
When you came to pay (on 15 January 2012) you made the payment out the bank account and the account that you charge this payment to should be the Sundry Creditors account and NOT the Taxation Charge account so that you use up the provision made in the 2011 period.
Hi
I am trying to fill up the journal entry so
In the acount filed and Did - Taxation Charge - then it asked me to create a new account - what type of account should i create here?
Also what type of account do i need to create for the Sundry Creditors?
Ken
IMHO your accountant should have told you how to enter the adjusting entry.
To create the P&L account as Mollcons stated, this is either an expense acccount or an income account as the tax is something you pay then in this case create a new expense account called Taxation charge.
This is created in the chart of account.
Also create the Liability account as a other current liability type account in chart of account. call this "year end tax accrual".
Now create the Journal as stated:-
Dr Taxation Charge (P&L) "New Expense Account"
Cr Sundry Creditors (Liability) "New Other Liability Account"
By doing this the expense account caters for the tax paid in 2011 and the liability for it sits in the liability account to be cleared by the cheque written in 2012.
Which you enter at what date you make the payment but in the expense column post to the new "Other Liability Account"
