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User Tips
A quarterly feature from WON Systems geared towards enabling users to make full use of their Agency Business Software Solution. |
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February 2005
How to track Canadian GST/PST collected and GST tax inputs using
Clients & Profits.
Recording the Canadian Goods & Services Tax (GST) & Provincial
Sales Tax (PST) that you collect from your clients and the GST tax
that you pay to your vendors is a simple process using your Clients
& Profits software. At any point in time you can easily determine
your GST/PST liability for all posted transactions. PST follows the
same steps as GST and the only differences will be highlighted below
in step six.
The following steps will assist you to automate your sales tax tracking
process:
1. Create two general ledger accounts for your GST:
The most common practice is to setup two separate general ledger liability
accounts for tracking GST:
- Revenue collected general ledger liability account this will
track all the client sale GST amounts.
- Input Tax Credit (ITC) general ledger liability account this
will tack all the ITC amounts paid on your expenses which will
usually offset the amounts in 1. (a). If you are generally in
a debit position on GST (i.e. you have significant out of province/country
sales) you may want to classify these two accounts as assets.
When you prepare your GST return you can then print the above accounts
(make them consecutively numbered for easier printing) together and
produce a listing of the two sub-totals and a net grand total which
is required for the GST return.
When you issue the GST cheque you would then clear both accounts in
the distribution of the cheque using the dGL (since the net difference
of the two accounts is the credit to cash). If its a refund you could
then post it to a miscellaneous accounts receivable until paid.
Finally, you will need to ensure that the GST is setup properly in
Setup/Preferences/Sales Taxes. You should designate a name, rate and
GL account for revenue collection.
2. Tasks & Job Tickets:
- In the Setup/Preferences/Sales Tax section of the software you
will want to setup GST usually as "Sales Tax" and the rate at
"7"%. You will also point it to the General Ledger account that
you created in point 1 above for your revenue.
- Next, in the Setup menu under Task Table - you would "X" off
the relevant GST box. GST will be applicable on everything and
hence you will need to do this on all your tasks. If you are changing
tasks that are already on open dockets, you will want to X off
the "Update Existing Job Tasks" at the bottom of the window.
In the situation where the client is GST exempt this should be handled
in My Menu under My Clients. The applicable client would then have
their "Billing Information" adjusted such that the GST rate was 0%
and hence would override the task setup.
3. Accounts Payable:
When you enter invoices from your vendors, the amount of GST is input
as a separate line item using NONE as the job ticket no need to
use a task. Remember to use the GST ITC account for the dGL for the
job "None" distribution line on the A/P invoice. Every invoice for
a job cost that includes a GST amount (out of country invoices will
not require it) will be distributed over at least two lines - the
job cost task and the GST line. The steps are as follows:
- Choose Add New Invoice in Accounts Payable.
- Enter a payable per the directions in the manual and finalize
by proofing and posting.
- The GST paid will show up in the general ledger once the invoice
is posted and will not show up on the job as it's a recoverable
expense to the agency.
4. Accounts Receivable:
The invoicing section of accounts receivable is the most automated
area as it relates to tracking your GST. When you enter invoices for
your clients, the amount of GST is automatically calculated for you
based on its inclusion in the task setup. Since everything is still
modifiable at the pre-post invoice stage, any modifications can still
be made to GST applicability (i.e. exempt status etc.). The steps
are as follows:
- Choose "Add New Invoice" in Accounts Receivable.
- Enter client invoices per the directions in the manual.
- Proof and post as directed in the manual.
- The GST collected will show at the bottom of the invoice and
in the general ledger once the client invoice is posted.
5. General Ledger:
As soon as an accounts payable or accounts receivable transaction
with a GST amount is posted, the general ledger total for the GST
account will be updated automatically.
Use the financial reports Under Snapshots or the audit trail in the
General Ledger section to see totals and details about your GST liability
at any time.
6. PST Differences:
- There are no Accounts Payable aspects to PST as there are no
ITC's present. In the majority of cases the PST is not chargeable
from your vendor to you on goods for resale to your client.
- In the case where you are inputting overhead invoices where
PST is applicable, the most often used procedure is to add the
PST to the cost of the related expense line (i.e. computer supplies
or professional fees...) rather then doing a separate line.
- PST applicability varies between provinces and attention should
be given to correctly applying it to the right costs in order
to avoid both overcharging your client as well as possibly becoming
responsible for undercharged PST in the future. When you determine
what PST applies to, you can assign that tax to the relevant tasks
in the Setup/Tasks section. By "X"ing the Sales Tax 2 Box in Setup/Tasks
this will automatically assign the task to the right revenue when
billed.
Also ensure that the PST is correctly named, has the correct rate
and is going to the right GL account in Setup/Preferences/Sales
Taxes.
- In certain situations you may be responsible for submitting
PST for other jurisdictions. In those cases C&P can track
your liability through the following steps:
- Setup another general ledger account for this PST liability.
- For the clients that have this PST liability, and not your
Province's own, replace your new general ledger # in the "My/My
Clients/Billing Info/Rate 2" with the local province PST General
Ledger Account #.
- When it comes time to submit that out of province tax you
need only issue a cheque, as described in point one, using
that particular PST general ledger account number.
- Finally, in rare occasion where an alternate sales tax name
may need to be used, this can be changed temporarily in the Setup/Preferences/Sales
Taxes. Once the invoice is printed it can be returned to the original
name.
APPENDIX GST/PST Alternative Method:
Create a task for GST/PST: In rare situations you
may have to create a task for GST/PST. The formatting of the invoice
for the client may one situation. The procedures would be as follows:
- This task may have any code, but GST/PST is a simple one to
use. Whatever description you input for the task name, it will
appear on the client invoices.
- The cGL (revenue) and dGL (costs) will be the two chart of account
numbers for GST/PST that you set up in your general ledger. All
other task information may be left blank; or, if you use the group
and sort features, designate the GST task with an appropriate
group and sort so that it will appear as you want on your Accounts
Receivable invoices.
- You may input the GST/PST task at any time. If you DO NOT want
it to appear on an estimate/invoice, enter the GST/PST task after
the final estimate has been printed for the client or mark the
"X" in "Estimate Options" to "Hide Tasks with no Estimates".
For detailed instructions on the
"alternate method" please refer to the Clients & Profits website
- http://www.clientsandprofits.com/support/FAQs/tech_notes/technote_GST.html.
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