When entering a transaction (e.g. a purchase invoice) in MoneyWorks, the tax code used in the detail line follows the tax code set in the account used. For example, the transaction tax code will be OP (Out-of-Scope) if the tax code for the account (e.g. prepayment account) is OP tax code.
You can change the tax code (under the TC column) when entering the transaction, such as changing OP to G tax code (except * tax code). Usually, non-taxable account such as the bank, shareholder funds, accounts receivable and accounts payable use * tax code. If you have an account with a * tax code in a transaction and wish to change, you got to do it at the account level instead (From the accounts list, highlight the account you want to amend and click on the Modify button to edit the tax code).
Override tax code
If there is any tax code set in the name profile (Supplier or customer), the tax code set in the name profile will override the tax code in the account. Assuming the tax code for the prepayment account is OP, and the tax code in the supplier is G tax code. When entering a transaction for the supplier with the prepayment account, MoneyWorks will pick up the G tax code instead of OP to calculate the GST (Goods and Services Tax).
Override tax code helps speed up data entry and reduce entry errors. For example, you have tagged the G tax code (standard rate GST) for the revenue account, and the export customer has a Z tax code (zero-rated GST). The invoice will remain as G tax code for the local customer but change to Z tax code when invoicing the export customer.
The list of tax codes is available in MoneyWorks’ tax rate table (access from the Show menu).
**Please refer to the IRAS GST e-tax guide for more information.
MoneyWorks is accounting software, not a payroll system; it will not auto-compute the staff salary (e.g. bi-monthly part-timer’s hourly wages or change of CPF contribution according to the employee’s age). A payroll system or a spreadsheet (if it is simple) will do a better job than an accounting system.
Of course, although the accounting system does not compute payroll, you still have to record the monthly payroll via a general journal or payment transaction to update the ledger.
If you are entering the payroll in a lump sum via a general journal, then the journal could be:
DR. Salary expense (PL)
DR. CPF employer contribution (PL)
CR. Accrued CPF payable (BS)
CR. Accrued salary or the bank account (BS)
CPF, the Central Provident Fund, is like the Social Security fund in some countries. The contribution rate will change according to the employee’s age. The employer contribution is a company expense, whereas the employee contribution is deductible from the employee’s salary. Both CPF contributions will be accrued together with the SHG funds and paid out to the CPF Board on the next due.
SHG funds (Self-help group funds) include:
Chinese Development Assistance Council (CDAC) Fund
Mosque Building and Mendaki Fund (MBMF)
Eurasian Community Fund (ECF), and
Singapore Indian Development Association (SINDA) Fund.
DR. Salary (PL): 10,000
DR. CPF Employer (PL): 1,700
CR. Accrued CPF (BS): 3,702
CR. Accrued salary or the bank account (BS): 6,298
Credit the accrued salary account instead of the bank account, and then use a payment transaction to pay the employee individually with the accrued salary account to facilitate the bank reconciliation later. Of course, you should consider setting a security level on those payroll-related accounts to prevent unauthorised MoneyWorks users from viewing the transaction history.
Payment transaction method
You may also consider using a payment transaction to enter the monthly payroll of each employee instead of using a general journal to record the payroll for the month in a lump sum. This method works if you prefer to view the ledger detail by the employee.
To enter the employee payroll for the month, you have to add the expense and less the accrual within a payment transaction. In the payment transaction, select the appropriate bank account and payee, and in the detail section, enter as:
So, the transaction gross for the payment will be 2,399.00
You can enter all the accrued CPF payable into a single row (lump sum) or multiple rows as in my above example, but having rows with descriptions separating different type of deduction facilitate inquiry and printing reports.
Assuming you wish to print a report by the employee by account. You can first create an account inquiry, then shortlist the employees or transactions and print the list with subtotal by the employee.
A payroll system will be more complex in reporting, and more features available (e.g. adjusting CPF rate based on the employee age, calculating the hourly wage for each employee, etc.). Using an accounting system for recording payroll may be workable for those SOHO or small businesses with fewer employees or require only basic payroll entry.
Do visit the Cognito website if your development team would like to integrate the payroll system with MoneyWorks accounting software, or engage a MoneyWorks consultant if you wish to import transactions into the accounting system.
Posted onMarch 18, 2022|Comments Off on How to record retention in QuickBooks?
Retention is money withheld by the customer of a contract (project); protect the customer against incomplete or defective works. The retained sum is usually released to the supplier once the project ends or after the warranty period.
Assuming the sum withheld is at every stage of the progress claim. For a progress claim of $100,000 with 5% retention, the journal behind the sales invoice will be:
DR. Accounts Receivable $101,650 DR. Retention Receivable $5,000 CR. Sales $100,000 CR. GST Payable: $6,650
To record the retention in QuickBooks Online, first, you create a retention item (can be a service item) and link it to the retention receivable (a current assets account). Then, use it in the invoice with a negative value to reduce the invoice total (the objective is to reduce the receivable and not the revenue).
To view the retention receivable, you may run a report for the retention receivable account (from the Chart of Accounts) and group it by the customer to check the retained sum by the customer or for a job (if you are using the project feature in QuickBooks Online).
You may then issue an invoice to the customer for the retained sum once the project ends. The journal for the invoice:
QuickBooks Online is a small business account system suitable for small businesses and SOHO. Although it does not have a complex project accounting feature, it should be sufficient for basic project tracking.
The letter of claim is not a tax invoice, and the retained amount has to account for the GST upon payment received or invoice issued, whichever earlier.
To create an account in QuickBooks Online (QBO):
Click on the Gear icon and select Chart of Account from the list.
Click on the New button in the Chart of Account list to add an account.
To create an item in QuickBooks (QBO):
Click on the Gear icon and select Products and Services.
Click on the New button in the Products and Services list to add an item.
Comments Off on How to record retention in QuickBooks?