Example of posting tax amounts on advance payments

During the advance payments of purchase invoice procedure, LN creates the financial postings described in the following example. Similar postings are created during the processing of advance receipts for sales invoices.

Example transaction
ExamplePurchase invoice data
Purchase invoice$ 100.00
Tax10%
AssumptionTransaction types with Negative Amounts Allowed = Yes
CMG Parameters (tfcmg0100s000)Calculate Tax on Advance Payments/Receipts = Yes

 

The Purchase Order transactions
Step 1. Create an advance payment with tax

Note: Tax amounts on advance payments are only calculated if you select the Calculate Tax on Advance Payments/Receipts check box in the CMG Parameters (tfcmg0100s000) session.

Debit/ CreditLedger accountAmount
DebitAdvance Payment$ 110.00
CreditCash$ 110.00
DebitNet Advance Payment$ 100.00
DebitPurchase Tax$ 10.00
CreditGross Advance Payment$ 110.00

 

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Step 2. Register the purchase invoice
Debit/ CreditLedger accountAmount
DebitCosts$ 100.00
DebitPurchase Tax$ 10.00
CreditAccounts Payable$ 110.00

 

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Step 3. Assign the advance payment to the purchase invoice
Debit/ CreditLedger accountAmount
DebitAccounts Payable$ 110.00
CreditAdvance Payment$ 110.00
DebitNet Advance Payment- $ 100.00
DebitTax on Assigning the Advance Payment- $ 10.00
CreditGross Advance Payment- $ 110.00

 

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