How do I add deductions for the payments received to the invoice?
srb9298
Member Posts: 2
While the customer pays, they do deductions for various other expenses. How can I reflect it so that the accounts will be equal for both parties?
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I had a situation where I (as a USA-based company) performed contracting work in a foreign country (Singapore) and was paid by a foreign (Singapore-based) company. A portion of my invoice was paid to the government of Singapore as tax. Here is what I did...
(Disclaimer: I am not an accountant or tax professional. I will be reviewing this with a tax professional when filing next tax statement.)
SOLUTION: Create a new Cash account (I called mine Foreign Tax Withholding) Use that account to apply a manual payment to the invoice for the amount withheld. Create a new Expense account in Cost of Goods Sold with the same name. Add a Transaction for the same amount to this Expense account.
From an accounting perspective, it looks like the client paid you and you paid the tax (which is essentially what happened on your behalf.)
The accounting should then balance and the invoice should continue reflect the actual amount paid by the client. (Consult an accountant or tax professional in your jurisdiction for the rules that apply to you.)
I am a freelance accountant from Pakistan. Here the Withholding Income Tax deduction on invoices is mandatory if you are a local seller and not a commercial importer. One of my client was facing the same issue. I therefor created a cash account name ADVANCES TO FBR and post the same to another assets account WITHHOLDING INCOME TAX (ADVANCE) as the person making a payment has paid the tax to government on my behalf. It is prepaid tax. I will adjust the same in annual. Wave team told me if they found such issues they will make changes.