Sales Tax Balancing Process

Chris_SHCC1

Hi guys

Help on this one if possible!

Sales Tax owed in Wave $153.95

In the real world -

Sales Tax with Tax Office $154
Penalty with Tax Office $210
Credit with Tax Office $460
Balance with Tax Office $96

Sales Tax refunded to bank account in Wave $96

Questions -
1. How do I balance out the $153.95 correctly calculated by Wave with the $96 refund.
2. How best to address the rounding always done by our tax office?

Regards
Chris

Mikeg

Chris,
I classify the rounding discrepancies to a miscellaneous account as an expense. How did the credit come up? Is it booked in Wave? You will not be able to correctly post an entry without the credit that you had with the tax office. The 460 credit should be a debit in the sales tax payable account. Lets run through an example using your numbers.
Opening Sales tax payable -460.00
Sales INV001 153.95
Penalty (a) 210.00
Rounding(b) .05
Ending Balance Sales tax Pay -96.00 (means you have a credit with the tax office debit balance in a liab)

(a) Journal Entry
Debit Penalty (expense non deductible) 210.00
Credit Sales Tax Payable 210.00
(b) Journal Entry
Debit Miscellaneous Expense .05
Credit Sales tax Payable .05

Mike G, CPA
www.mgfinancial.net
Better Service - Better Pricing

Chris_SHCC1

Hi Mike

Thanks for that - certainly pointing in the right direction.

The $460 credit is a Fuel Tax rebate - only seen at the tax office end and applied by them on the basis of your fuel purchases at the point of sales tax return submission.

So it sits like this -

Sales due on sales $153.95
Penalty due $210
Fuel Tax credit applied $460

Refund due $96

Cheers
Chris

Charlotte

@Chris_SHCC1 thanks for following up to let us know you have things in order! And thanks Mike, as always. Hope to see you around!

Chris_SHCC1

Hi Charlotte

Yes, trying to follow it through but my brain struggles with things I don't physically see in my transactions! i'm sure I'll get there!

C.