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Using TurboCASH

 







TAX ACCOUNTS
CREATE OR EDIT TAX ACCOUNTS
  
If you are currently registered as a VAT vendor or if you need to register as a VAT vendor in future, you need to use Tax accounts to process your transactions in batches and documents. If you are registered as VAT vendor at your local Tax Office, you need to charge VAT on your Sales (Output Tax) and to record the VAT (Input VAT) on your Purchases.

For each of these Tax types you may need to create additional sub-accounts to accommodate the various classifications and / or tax percentages to assist you in completing your VAT returns and make correct payments to the Tax authorities. If you have converted a Set of Books from a previous version of TurboCASH or Pastel version 5.2, your Tax or VAT accounts or codes will be automatically converted. TurboCASH will have set up an Output VAT and an Input VAT account as sub-accounts of the VAT Control Account as Current Liabilities for you in the templates.

Tax codes or VAT accounts created in the Edit - Accounts - Tax Accounts menu option. General Ledger main account created in the Edit - Accounts - General Ledger menu option. General Ledger sub-account created in the Edit - Accounts - General Ledger menu option. Tax Code List

 

You need to use this option whenever you wish to create a new Tax account or Tax code for VAT (Output Tax as well as Input Tax). You may also change the descriptions of an existing account, change the percentages and the dates of effect on your various tax types and percentages whenever the legislation is amended or to delete an existing account. The Tax codes and percentages, which apply for VAT, are prescribed by VAT or Tax Legislation and may be amended from time to time by the Tax Authorities.

The Tax codes and percentages differ from country to country and you may be required to change the percentages and create new codes when the legislation changes. It is of utmost importance that you create these codes and percentages correctly to suit your needs and the requirements of legislation applicable to your country. You need to have to create or add the Tax Accounts (Tax codes) which you will need to fill in your VAT return. TurboCASH will generate the necessary Tax or VAT reports for your Tax codes.

These Tax codes or Tax accounts should be created as sub-accounts. Before you may create the Tax codes you need the following 2 general ledger accounts created in the Edit - Accounts - General Ledger menu option:
  1. VAT Control Account - the main account, which will be used as a totalling account for the Tax codes created in this menu option.

  2. VAT Payments Account - the sub-account which you need to allocate your Tax payable (as submitted on your VAT returns) when you make payments in the payments journal to the Tax Authorities. In the cases where the Input Tax is more than the Output Tax, where you need to allocate the refunds received from the Tax Authorities in the receipts journal.
The Tax codes need to be created within the account codes or numbers of these 2 general ledger accounts. For each of the VAT items on the VAT return, you need to have a Tax code, which will contain the description and percentage as prescribed by legislation for your country. In South Africa some of the following VAT codes are currently used:

Block
on VAT Return
Tax Code Short Description
1 Output Tax - Standard Goods - 14% Selling of Goods and Services
1A Output Tax - Standard Goods (Capital) - 14% Selling of redundant equipment (old computers / vehicles, etc.)
2 Output Tax - Zero Rated - 0%  This is Taxable Supplies, but is rated at a zero rate (0%).
15 Input Tax - Standard Goods - 14% Purchases of goods and services, for which you have a valid Tax Invoice from a registered VAT vendor.

If you do not have a Tax Invoice or certain items are excluded from VAT (e.g. Tea refreshments, staff parties, expenses relating to exempt supplies, etc.) you need to select No Tax for the specific transaction.
14 Input Tax - Capital Goods - 14% Purchases of Capital goods or services, which will be used in the business.
17 Adjustments - Bad Debts If VAT was charged to Debtor accounts, and VAT (Output Tax) was submitted and paid over on a previous VAT return, and the amount is irrecoverable, the bad debts selling price - exclusive of VAT must be written off as bad debts and the tax amount to this Tax code. You need to keep proof that you have made attempts to collect this debt.

There may be some other Tax codes, which may be applicable to your business, such as exempt supplies, etc. and these Tax codes and specific conditions for Output Tax or Input Tax may apply. It is recommended that you obtain the necessary information from your accountant or the tax authorities or visit the South African Revenue Services Web Site http://www.sars.gov.za to obtain the latest information.

In the United Kingdom some of the following VAT codes are currently used:

Tax Code Short Description
Output Tax - Standard Rate - 17,5% Selling of Goods and Services
Output Tax - Reduced Rate - 5% Selling of certain goods and services.
Input Tax - Standard Rate - 17,5% Purchases of goods and services, for which you have a valid Tax Invoice from a registered VAT vendor.

If you do not have a Tax Invoice or certain items are excluded from VAT (e.g. Tea refreshments, staff parties, expenses relating to exempt supplies, etc.) you need to select No Tax for the specific transaction.
Input Tax - Reduced Rate 5% Purchases of specific goods or services, which will be used in the business.
Input Tax - Zero Rated - 0%  This is Taxable Supplies, but is rated at a zero rate (0%).

It is recommended that you obtain the necessary information from your accountant or the tax authorities or visit Her Majesty Customs and Excise Web Site http://www.hmce.gov.uk to browse the Web Site for Income Tax related issues for UK based Users.

To create a new Tax Account:
Click on the Edit - Accounts - Tax Account menu option or press the and and and keys on your keyboard. The Tax Accounts search facility screen and the Tax Accounts screen will be displayed.

Title bar. Click to close or exit this screen. Click to create a new Tax code or VAT account. Click to select a Tax code or VAT account. Click to delete a selected Tax code or VAT account. Click to save the entered data. Enter or select an Account Number. Enter a 3-digit Sub-account number for the Tax code or VAT account. Enter or edit name or description for the Tax code or VAT account. Select an available Account Reporting Group from the list. Enter a valid date or select the date from which you are registered for VAT or from which the Tax code is applicable. Click to save the changes. Click to close or exit this screen. Enter the applicable % which applies to the Tax (VAT) code. Enter a valid date or select the date until which the Tax code is applicable. If this date cannot be determined, select a date in the far future. The Account number field and the Sub-account number will be cleared, in which you may enter a valid Account number and a new 3-digit Tax code in the Sub-account field. The Sub-account number field will be cleared, in which you may enter a new 3-digit Tax code.
Press the button on your keyboard or click on the Close button to exit the Tax Accounts Search facility. The following Confirmation screen will be displayed:


Click on the button to create the Account.
Select and enter the following information:

Option Description
Account Number Select the Account Number of the VAT Control Account. This Account should have already been created in the Edit - Accounts - General Ledger menu option.
Sub-Account Enter three-digit numeric characters between the ranges 001 and 999. It is recommended that you group your Output Tax codes and Input Tax codes, leaving spaces to add or insert new Tax codes when the need arises.
Description Enter the name for the Tax code or Account. It is recommended that the description should clearly reflect the Tax descriptions you need to select when processing transactions.
Account Group 1/2 The Reporting group to which you wish this general ledger account to be allocated. Account Group 1 and 2 or any other name or description you have entered on the Reporting Group Name field on the Account Groups tab of the Setup - System Parameters - Groups menu option. You may select any available reporting group from the drop down list.
Valid From: Select the starting date from which the applicable tax rate is valid.
To: Select the end date until which the applicable tax rate is valid. If the date is not ascertainable, use a date far in the future.
Percentage: Enter the percentage applicable to this tax account (e.g. 14.00 or 0.00), whichever is applicable.

Click on the button to save your changes. The Tax Accounts Search facility will be displayed. Click on the Close button or press the button to close and to exit the search facility screen and create your next Tax Account.

If you need to edit an existing tax account, you may select the account and change the descriptions, percentages, dates or the account groups.

VAT in Batches / Journals

Whenever you process a transaction in batches, you need to check on the source document if VAT applies and what category or code applies and select the applicable tax code for the transaction. TurboCASH will calculate the correct VAT inclusive or exclusive according to the percentages for which the VAT applies. The following guidelines as to transactions in batches / journals (on which Output or Input Tax code are applicable) is as follows:

VAT on Documents

If you are trading in stock items from your stock code file, you need to select the correct Output Tax and Input Tax codes, which applies to each of your Stock Items in the Edit - Stock Items menu option. When you process documents for your debtors or customers (invoices, credit notes, quotes and point-of-sale invoices), and you select a Stock Item, TurboCASH will calculate the correct Output Tax (VAT) inclusive or exclusive according to the percentages for which the VAT applies.

Should you process documents for your creditors or suppliers, (purchases, stock or goods returned documents or orders), TurboCASH will calculate the correct Input Tax (VAT) inclusive or exclusive according to the percentages for which the VAT applies.

It is important to check whether you enter your selling prices and your cost prices inclusive of VAT when you create and take-on your Stock Items. This is important, since you need to select the Inclusive or Exclusive mode when processing documents. This will definitely have an impact on the selling prices and cost prices and consequently, your gross and net profits.

Ensure that your Tax codes (VAT Accounts) is entered in this menu option, otherwise the applicable Tax rates and the dates on which the Tax rates are applicable will not work.