Getting Started in Bookkeeping For Dummies by Veechi Curtis

Author:Veechi Curtis
Language: eng
Format: epub
Publisher: Wiley
Published: 2010-10-28T16:00:00+00:00

Setting Up Tax Codes in Accounting Software

Earlier in this chapter, I explain that you get four scenarios with GST: Sales or purchases with GST that you report on your BAS; sales or purchases without GST that you also report on your BAS; sales or purchases without GST that you don’t report on your BAS and last, sales and purchases where you get charged GST but can’t claim it. When you work with accounting software, you need a tax code for each of these scenarios, plus a couple more besides.

In the next few pages, I explain how to set up tax codes, and then how to link the accounts in your chart of accounts to these tax codes. (Refer to Chapter 2 for more on the chart of accounts.)

Creating a list of tax codes

Here’s a quick-and-dirty summary of how to set up tax codes for both MYOB and QuickBooks. Other accounting software may have slightly different approaches, but the principles are the same regardless of what software you use.

1. Make sure you have a tax code for GST sales and purchases.

In MYOB, this code is simply GST. In QuickBooks, this code is GST; or alternatively, NCG (for GST on Purchases) and GST (for GST on Sales). By the way, in QuickBooks, you also need to customise a tax items list so that QuickBooks knows how to report tax codes on your BAS. For more details, refer to my tome QuickBooks QBi For Dummies or refer to QuickBooks help.

2. Create a code for GST purchases that are also capital acquisitions.

I talk more about capital acquisitions earlier in this chapter in the section ‘Move it, groove it, tax it’. In MYOB, this code is usually either CAP or GCA. In QuickBooks, this code can be either CAP or CAG.

3. Create another code for items that are GST-free.

In MYOB, this code is simply FRE. In QuickBooks, this code can be either FRE, or NCF (for GST-free purchases) and FRE (for GST-free sales).

4. Now create a tax code for input-taxed sales and, if necessary, another for input-taxed purchases.

Input-taxed sales is a fancy name for interest income, dividend income or residential income. In both MYOB and QuickBooks, I use the code ITS for input-taxed sales. For expenses that relate directly to input-taxed sales (property expenses, for example), I use a code called INP.

5. Last, create a code for non-reportable transactions.

In MYOB, the N-T code is the one to use for non-reportable transactions. Because MYOB uses N-T as the default, this tax code automatically comes up on transactions unless you select something else.

In QuickBooks, I suggest you create a new tax code called NR for non-reportable transactions. Some people don’t bother using any code for non-reportable transactions in QuickBooks, but I don’t recommend this method. Unless you enter a tax code for every transaction, it gets tricky to distinguish between transactions where you have forgotten to enter a tax code and transactions that you know are non-reportable or exempt.

6. Do a pirouette or two, then see if your list of tax codes looks anything like Figure 5-2.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.