Category Archives: QuickBooks

Change of GST rate in QuickBooks Desktop from 7% to 8%

Singapore’s GST rate has scheduled to increase from 7% to 8% from 1 January 2023.

References:
IRAS | Overview of GST Rate Change

QuickBooks Desktop is an accounting software installed on the computer desktop (Windows) following US, UK or Canadian tax; therefore, it is likely that it will not get any patches to update when there is a change in the Singapore GST rate. Although you are not getting an auto-update on the tax rate, no worries; changing the tax rate in QuickBooks Desktop is not too complicated.

Edit or add new?

Yes, editing the tax rate of the existing tax item is possible, which requires less effort, but adding a new set of 8% GST items to your QuickBooks Desktop file is preferred.

Why?

During the transition period, you may require using the 7% for some transactions instead of the new 8%; therefore, adding a new GST item with the new rate may be a better option than changing the GST rate of the existing GST item from 7% to 8%.

Besides, QuickBooks does not have a “posting” feature that permanently “locks” the transactions. It will update to the new rate if the user has accidentally amended past transactions. For example, a salesperson may amend and reprint an invoice when the product or quantity entered was incorrect or changed, and the invoice gets updated with the new rate when saved.

You, as an administrator, decide whether to edit or add a set of GST codes and items to QuickBooks Desktop. Below are steps to recap how to set up a new rate in QuickBooks if you opt for the latter.

Set up GST code and GST items

You need to select the appropriate GST code when entering a transaction (e.g. Sales Invoice or Bill), and the GST amount calculates based on the rate set in the GST item, which links to the GST code used. The GST amount (either input or output GST) will then tag to the Tax Agency (e.g. Comptroller of Goods and Services Tax or IRAS) for printing the GST report and update the appropriate GST ledger.

Transaction > GST Code > GST item (with GST rate) > Tax Agency > GST Reports/GST Ledger.

You should have the tax agency and GST ledger account set up in QuickBooks if you are already a GST-registered trader. You only need to add the new GST code and items and link it to the existing tax agency.

The GST item (Sales Tax Item) is in the QuickBooks item list, which you can find under the lists menu. Below is an example of how to set up a GST item for the input tax.

GST input tax:
Sales Tax Name: 8P (you can have a different tax name)
Description: 8% GST input tax
Tax Rate (%) or Amt: 8.0% (you need to have the % symbol; if not, it will be 8.0 dollars)
Tax Agency: Comptroller of Goods and Services Tax
Sales Tax Return Line: Tax on Purchases

8% GST

I am using “8P” as the GST item code for input tax in the above example (your item code may differ from mine). Link the Sales Tax Return Line to the Tax on Purchases to show the tax amount in the Tax on Purchases section (input GST) of the Tax Detail Report. Save the GST input tax item and add a GST output item for the 8% to the list.

Next, link the two newly created GST items to the GST code. The GST code list, which is the Sales Tax Code list in QuickBooks, is under the lists menu. In the below example, I am using “8” as the GST code and linking to the “8P” and “8S” tax items, which are my input and output tax items.

new 8% GST

That’s it. You can now use the new GST code in the transaction.

Update products and name list

The items (and maybe also the customers and suppliers) are in the old 7% GST rate, which requires updating. Manually change them if you do not have many, or use the “add/edit multiple list entry” feature in QuickBooks to edit the tax code. Consider using a third-party importing and exporting add-on tool (such as Transaction Pro) if you have a complex requirement.

BACKUP before importing data into the QuickBooks file! And do database maintenance after importing data.

Amend templates

You do not need to change the formula in the template (e.g. Sales Invoice or Purchase Order form), but if you had hard-coded field labels such as “GST @ 7%” after the subtotal field or in the memo, you need to update them. Consider having a new set of templates for 8% rated GST instead, in case you need to reprint the invoices.

Don’t forget to save a backup of the QuickBooks file before changes. Engage a QuickBooks consultant to help make the necessary changes if you are unsure or have no time.

Reckon Accounts

(for Reckon Accounts users)

Reckon Accounts (formerly known as QuickBooks Australian version or QuickBooks Asia version) follow the Australian tax system. Setting up a new tax rate is slightly different from Intuit QuickBooks, but the relationship between the tax code, tax items, tax agency, and the tax ledger account is similar. You may engage a Reckon Accounts consultant to help make the necessary tax changes if required.

How to record the GST paid on your behalf by the forwarder in QuickBooks?

The non-GST registered overseas supplier will not be billing you GST for the goods imported, but you have to pay the GST directly to the Custom or the forwarder if they paid on your behalf.

Assuming the bill received is S$100,000.00. You enter the Bill into QuickBooks Online (QBO) as debiting the cost of goods sold and crediting the accounts payable with NR (non-registered trader) or OP (out-of-scope purchase) GST code. Note: It debits the inventory assets instead of the cost of goods sold if you are using the inventory feature in QuickBooks.

Enter Bill in QuickBooks

Let’s say the forwarder billed you:

  • Transport/Trucking/Storage charges: $5,800.00
  • Custom clearance charges: $150.00
  • Custom documentation fee: $30.00
  • 7% GST (paid on behalf): $7,000.00

Subtotal: $12,980.00
GST 7% (on $5,800): $406.00
Amount due: $13,386.00

The $7000 is the GST paid on your behalf, whereas the $406 is the GST for the forwarding services.

So, you record the forwarder bill into QBO as:

  • Row 1: Freight Charges: 5,800.00 (7% GST)
  • Row 2: Freight Charges: 150.00 (OP GST Code)
  • Row 3: Freight Charges: 30.00 (OP GST Code)
  • Row 4: Cost of Goods Sold: 100,000.00 (with 7% GST)
  • Row 5: Cost of Goods Sold: -100,000.00 (OP GST Code)
Enter Bill in QuickBooks

Note: 

  1. Row 4 indicates the taxable amount of $100,000 for the $7000 GST paid, which will show in the GST Form 5 report.
  2. Row 5 is a reverse of the taxable amount of $100,000 from the cost of goods sold since the actual purchase has already been recorded (Supplier Bill).

GST Form 5 box number 7, input tax and refund claims:

QuickBooks GST Report

Exchange rate

The taxable amount in the Singapore dollar is converted based on the Custom exchange rate, which may be different from your system exchange rate. Therefore, the taxable amount (Singapore dollar equivalent) in the forwarder bill may not be the same as the supplier bill you entered earlier. You claim according to what you have paid.

QuickBooks Online (QBO) is a cloud-based accounting system. It uses a web browser to access your company file without the software installed on your computer. You may contact us if you wish to switch to QBO from QuickBooks Desktop or Reckon Accounts.

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).

QuickBooks Retention Report
Retention – Quick Report

You may then issue an invoice to the customer for the retained sum once the project ends. The journal for the invoice:

DR. Accounts Receivable $5350
CR. Retention Receivable $5000
CR. GST Payable $350

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.

Note:

  1. 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.
  2. 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.
  3. 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.