Tax Ledger—Basic Data and Requirements Exercises

Main Exercises

Company Basic Data

Introduction: There are great differences in taxation, even within the European Union. Therefore, these exercises can approach the issue only in a general manner. They are primarily intended to show how to set up the tax ledger and extract the data. The data covered in the section below describes a basic setup for tax handling, which is necessary to create tax relevant postings and later extract information from the tax ledger. 

Purpose: The purpose with the exercises below is to review and change the basic parameters for you company. The Company window consists of several tabs. Be sure to save your data before clicking the next tab.

Windows:
Company

Company – Invoice

Windows:
Company/Invoice

1. Open the Company/Invoice window, populate it (F2), and select your company.
2. Verify that the Use Tax Type VAT check box has been checked.
3. Enter your tax number.
4. Select the Cash Discount on Gross Amount check box.

Note: For the United States and Canada, you should NOT check the Use Tax Type VAT box.

Company – Accounting Rules

Windows:
Company/Accounting Rules

1. Open the Company/Accounting Rules window, populate it (F2), and select your company.
2. Set the default amount method to Net Amount Entry.
3. Enter a maximum overwriting level on tax. This amount should be 5 (in percent) or 1 (in accounting currency).

Note: Overwriting may be necessary when the tax amount calculated from the tax code differs from the tax amount printed on the external voucher (e.g., because of rounding errors). To avoid typographical errors, you need to set a reasonable limit. 

Company – Payment

Windows:
Company/Payment

1. Open the Company/Payment window, populate it (F2), and select your company.
2. Verify that the VAT Reduction on Cash Discount and Suggest Discount on Partial Payments check boxes are checked.

Note: The VAT reduction on cash discount applies only if the cash discount is based on the gross amount. 

Payment Basic Data

Purpose: The purpose of this exercise is to show you how to check basic parameters for your company.

Windows:
Write-off Codes

1. Open the Write-off Codes window, and create a new record (F5).
2. Enter DIT as the write-off code and Damage in Transit as the description.
3. Select the Tax Reduction check box.
4. Save your changes.
5. Select the row, right-click and then click Write-Off Limit per User.
6. Select your user from the List of Values (F8), and enter a Limit of 1,000.
7. Save your changes.
8. Add your write-off code, DIT, to the details of Posting Types PP17 and PP34.

Accounting Rules – Tax Codes

Purpose: The purpose of this exercise is to show you how to check basic parameters for your company.

Windows:
Tax Codes

1. Open the Account window, and populate it (F2).
2. See whether the taxes listed in the table below have already been entered. Add the missing tax codes.

3. Save your changes.

Note: For the United States and Canada, enter Tax Type Tax Codes of Sales Tax and Use Tax as needed. 

Accounting Rules – Tax Liability Date

Purpose: The purpose of this exercise is to show you how to verify setting of tax liability date for your company.

Windows:
Tax Liability Date Control

1. Open the Tax Liability Date Control window.
2. The dates when tax transactions are liable for reporting are displayed in the Customer Invoices field, Supplier Invoices field and Payments field.

Note: Exceptions can be defined for selected tax codes if tax transactions using this tax code are liable for tax reporting at specific dates.

Accounting Rules - Accounts

Purpose: The purpose of this exercise is to show how to verify basic settings for your tax accounts.

Windows:
Accounts

1. Open the Accounts window.
2. Query for tax accounts. 
3. Verify that Tax Handling is set to Blocked for all accounts.
4. The Tax Account check box must be checked. It is also recommended, but not necessary, that also the Ledger Account check box is checked.
5. If changes are necessary save.

Note: The Ledger Account options secures that only automatic tax is handled, otherwise it is possible to use tax account in manual posting. Ledger Account can be selected only if there were no previous entries/postings on this account.  

Accounting Rules – Posting Control

Purpose: The purpose of this exercise is to check basic parameters for your company. They are automatically created when you create a company, verify that the parameters are correct.

Windows:
Posting Control

1. Open the Posting Control window, and press New (F5).
2. Enter value IP3 in the Posting Type field.
3. Enter Account in the Code Part Name field, AC1in the Control Type field and a tax account in the field for Default Value.
4. Save your changes.
5. Create a new row.
6. Enter IP4 in the Posting Type field.
7. Enter Account in the Code Part Name and AC7 in the Control Type field.
8. Mark the row, right-click and then click Details.
9. Check the entries shown in the table below.

Note: In the Account field, enter the appropriate tax accounts for your company. Use a different tax account for each tax code.  For the US and Canada, ensure that your tax codes are correctly entered in the Posting Control window.

Tax Code Group

Purpose: The purpose of this exercise is to show you how to group similar or related tax codes. These codes can be used as detail in tax reports.

Windows:
Tax Group

1. Open the Tax Group window, and create a new record (F5).
2. Enter Tax Group ID 01 and the description Tax Reduction.
3. Double-click the first line of the Sub Groups tab.
4. Enter Sub Group ID Full, with the description No Reductions.
5. Create a new record (F5).
6. Enter Sub Group ID Red, with the description Reductions.
7. Save your changes. 
8. Click the Sub Group Details tab.
9. Create a new record.
10. In the Subgroup ID field, select Full from the List of Values (F8).
11. Click the Sub Group Details tab, and select 1 from the List of Values.
12. Create a new record.
13. In the Sub Group ID field, select Red from the List of Values.
14. Click the Sub Group Details tab, and select 2 from the List of Values.
15. Create a new record.
16. In the Sub Group ID field, select Red from the List of Values.
17. Click the Sub Group Details tab, and select 3 from the List of Values.
18. Save your changes.

Tax Account Groups

Purpose: The purpose of this exercise is to show you how to group similar or related tax accounts. This function supplements the tax code groups and is used in the same manner as a detail level in the tax reports. The example below produces the same result as if you had used tax groups, while using a different approach.

Windows:
Tax Account Group

1. Open the Tax Account Group window, and create a new record (F5).
2. Enter Group ID 01 and the description Full.
3. On the Sub Groups tab, double-click the first row.
4. Enter Subgroup ID Full, with the description No reductions.
5. Create a new record (F5).
6. Enter Subgroup ID Red, with the description Reductions.
7. Save your changes.
8. Click the Tax Accounts tab.
9. Create a new record.
10. In the Subgroup ID field, select Full from the List of Values (F8).
11. In the Tax Code field, select a tax account from the List of Values.
12. Create a new record.
13. In the Subgroup ID field, select Red from the List of Values.
14. In the Tax Code field, select another tax account from the List of Values.
15. Create a new record.
16. In the Subgroup ID field, select Red from the List of Values.
17. In the Tax Code field, select a third tax account from the List of Values.
18. Save your changes.

Tax Office

Purpose: The purpose of this exercise is to show you how to define two detailed reports regarding sales and purchases for further use in your tax office. The reports have different levels of detail.

Windows:
Tax Office

1. Open the Tax Office window, and create a new record (F5).
2. Enter Tax Office ID T01, with the description Main Tax Office.
3. Select the default language and country.
4. Save your changes.
5. Click the Address tab, and create a new record (F5).
6. Enter Address ID 1.
7. Enter the address information and save your changes.
8. Click the Tax Report tab, and create a new record (F5).
9. In the Company field, select your demo company from the List of Values (F8).
10. Create a new row. 
11. In the Report No field, enter your previously entered tax reports SALES and save your changes.
12. Double-click again, select the List of Values (F8), and select PURCH.

Note: A tax office can be linked to any number of companies within a database, whereas the tax reports are linked to individual companies. 

Tax Books

Purpose: The purpose of this exercise is to show you how to define two tax books, one for including all tax received transactions and one for all tax disbursed transactions.

Windows:
Tax Books

1. Open the Tax Books window, and create a new record. (F5)
2. Enter tax book ID RECV, with the description Tax Received.
3. Select All in the Tax Code field and select Received in the Tax Direction field, to include all tax transactions with the direction received in the tax book.
4. Create another new record to define a tax book to include all tax transaction with the disbursed direction.
5. Enter the tax book ID DISB, with the description Tax Received.
6. From the Tax Code list, select All and from the Tax Direction list select Disbursed, to include all tax transactions with the direction disbursed in the tax book.
7. Save the information.

Note : In the case that you set the Tax Code field to Restricted, you must specify the tax codes to use with the tax book before you can close the window. (Right-click and then click Tax Codes per Tax Book to open the window in which to specify the tax codes.) A tax book can be connected to any supplier or customer.

Tax Report

Purpose: The purpose of this exercise is to show you how to define two detailed reports regarding sales and purchases for further use in your tax office. The reports have different levels of detail.

Windows:
Tax Report

1. Open the Tax Report window, and create a new record (F5).
2. Enter SALES in the Report ID field, with the description Sales Taxable.
3. In the Template list, click Tax Sales (Net).
4. Save your changes.
5. To create an additional report, create another new record (F5).
6. Enter Purch in the Report ID field, with the description Purchase Taxable.
7. In the Template list, click Tax Purchase (Net).
8. In the Detail Level list, change from Tax Code to Supplier.
9. Save your changes.

Note: Selection for tax codes, tax accounts, tax books, tax structures, branches or delivery types can be entered for each tax report to make the report result precise.