How do I deal with payment of an invoice in the AP which are subject to a deduction or addition.

Example, Invoices which are subject to Government Tax (Witholding Tax - % base) these tax are deducted at the point of payment however, when enterig a cheque via AP we enter the cheque amount which is less tax leaving a balance on the invoice representing tax.

The second senario is where there is an invoice in AP, you are paying that invoice by wire transfer/ draft etc. there is a bank charge incurred.

Question: can these charges be entered at the time of applying that payment to the invoice, however charging the expense in the case of "bank charges" and a liability acoount in the case of the "tax"?

Still waiting on a response from you guys

Appreciated!

Hi Odel,

The only deduction that is available when paying invoices in Adagio Payables is the early payment discount, based on Terms. There is no tax provision so that the check amount pays part of the invoice and the tax portion is automatically adjusted to leave the invoice fully paid. Unless your company doesn't use Terms and early payment discounts, in which case you might be able to substitute the discount on a paid invoice for this tax amount. There would be no tax reporting if this workaround is used.

How do you enter those invoices that are subject to government taxes? Can you give a numerical example of the invoice you enter, the payment you are entering, and the desired flow of paying the invoice and what GL accounts are updated?

Bank charges are not handled by Adagio Payables, as they are strictly your charges and nothing to do with the vendor payments. These would be properly handled using Adagio BankRec, where when the payment batch is retrieved from Payables into BankRec, you create an additional entry pretinent to the charge. Or if this bank charge has it's own line item on an electronic bank statement, it could be auto-created as a batch entry when using the Import Bank Reconciliation function.

Thanks for your response,

Our company is using terms but not the eraly payment discount based on terms.

Here is a transaction of an invoice which is subject to Gov't tax;
A subcontractor bills us for work done on a project on our behalf. He submitts his bill say $11,000.00 being Labour - $10k
and Gov't tax (10%) -1k (held by the company at the time of payment)

In AP the invoce charges the expense with the full invoice amount 11k. When paying the invoice 10k is applied to the invoice leaving the tax amount in the vendors account.(not good)

We would like to see the total invoice cleared but creating a charge in a liability account "Witholding Tax Payable"

I would be happy to treat this like a discount however it must be charged to the liability account, as a debt to the Government.

Thanks for you time, hope this is sufficient to give me a definite way foward.


Regards

Who is responsible for sending the taxes to the government? If you send $11,000 to the contractor, isn't s/he responsible for sending the taxes off?

We are responsible for deduction the tax from the vendor and paying to the Gov't

Regards,

Is it necessary that then invoice amount be shown as $11,000 when you do a transaction inquiry for the vendor, or would it be sufficient if it showed as being for $10,000?

Andrew,

I think i know where you are heading with this question. We would have like to see the witholding tax deducted at the point of paying the invoice. Thereby creating the liability at a later time rather than at the point when we create the invoice.

Saw we pay an invoice two months after it was received and entered that liability to Gov't would have been create two months down the line.

If there is no way getting around this then i would accept creating the liability at the time of intering the invoice.

Anyhow to answer your question, no it is not necessary to show the full amount.

Regards

Hi Andrew,

Please respond to my last resonse regarding my problem

Odel,

In most, if not all, North American jurisdictions, the legislation states something like: "taxes shall be remitted on all amounts collected or that will be collected on sales in the reporting period." In other words, the liability is created when the sale is made. That is why the software works this way.

It may be possible to create something close to what you want with some kind of custom report (in GridView or Crystal reports) that would calculate the taxes due on unpaid invoices and subtact that from the booked tax liability in the General Ledger.Your Adagio consultant would be able to help with that, if you wish, but it would require the purchase of one of those reporting modules if you do not already have one.