Tag Archives: Desktop accounting software for Mac

GST on imported goods

Software: MoneyWorks accounting software

Oversea suppliers are not supposed to charge GST if they are not a GST registered trader. The GST is paid to the Custom or a forwarder (if they paid the GST on your behalf) when goods arrived.

You can use the cost of goods sold or an expense account as a dummy account in the account tab of a payment transaction to record the GST paid. For example, you paid $700 GST on goods purchased; the entry will be:

Detail line 1:
Account: Cost of Goods Sold
Taxable amount: 10,000
Tax Code: IM
GST: 700

Detail line 2:
Account: Cost of Goods Sold
Taxable amount: -10,000 (negative)
Tax Code: OP (or *)
GST: 0

Imported GST

The Cost of Goods Sold contra off with each other and left the GST paid.

Due to differences between the internal exchange rate and the rate used by the Custom, the taxable amount could be different from the purchase value in Singapore dollar.

Note: You are supposed to record the import permit number in either Transaction user field 1, 2, or 3 on both purchase invoice and the GST payment, which will use in the IAF (Iras Audit File) report later if required. The Transaction User field label can be renamed to ‘Permit No’ from the Document Preferences to ease the data entry.

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Advance payment to the supplier

Software: MoneyWorks accounting software

Advance payment to the supplier (without using the purchase order process) is quite similar to the advances received from a customer which we have discussed in our earlier post. The steps required for paying advances to a supplier are:

  1. Record the purchase invoice for advance payment from the supplier.
  2. Made payment to the supplier without offsetting the purchase invoice. That is, leave it as an overpayment.
  3. Record the actual (or final) purchase invoice from the supplier and deduct the advances paid.
  4. Paid supplier and offset the advances paid at the same time.

The purchase invoice of the advance payment which we listed above (1) is to facilitate the overpayment process. You have to record the invoice even if you are not receiving any invoices from the supplier. You should create an item and associate it with the advance payment to the supplier account (which is a current asset account type) if you are tracking of inventory, and add this item to the purchase invoice. The purchase invoice debits advance payment to the supplier and credit the accounts payable account.

Advance payment bill

A cheque number, electronic transfer reference number, or an internal reference number can be used as the purchase invoice reference number if you are not receiving any invoices from the supplier.

Double entry:
Debit Advance payment to the supplier
Debit GST Paid (Input)
Credit Accounts Payable

Proceed with the payment to supplier once the advance invoice has posted. DO NOT select the advance payment invoice during payment process so to force it to record as an overpayment.

Paid advances

Suspense account

Double entry:
Debit Accounts Payable
Credit Bank

You can use the advance payment to supplier account or create a dummy current asset account such as payment in transit in the ‘suspense a/c’ field to facilitate the overpayment process. MoneyWorks create two dummy purchase invoices automatically when overpayment to supplier has recorded; one debits the account listed in the suspense account and credit the accounts payable, and another reverse it.

Double entry:
Purchase Invoice 1:
Debit Payment in transit (dummy)
Debit GST Paid (input)
Credit Accounts Payable

Purchase Invoice 2:
Debit Accounts Payable
Credit Payment in transit (dummy)
Credit GST Paid (input)

The advance payment invoice and the overpayment are both showing in the account payable ageing report which eases the tracking of the advance payment.

The Accounts Payable Ageing

The advance payment to the supplier item with a negative value has to add to the actual invoice received from the supplier; with a negative value, this entry credit and offset the advance payment to the supplier account.

Supplier Bill

Double entry:
Debit Stock on hand
Debit GST Paid (input)
Credit Advance payment to the supplier
Credit Accounts Payable

Then, offset the advance payment to the supplier and invoice, which you have entered earlier, together when paying the balances.

Paid supplier

Double entry:
Debit Accounts Payable
Credit Bank

Note for multiple currencies user:
There might be differences in the advance payment to the supplier account if the exchange rate used in the advance payment invoice and the actual invoice are different. You have to pass a general journal to clear the balances in the advance payment to the supplier to the exchange gain/loss account.

 

 

Receive deposit for the order (overpayment method)

MoneyWorks accounting system has a receive deposit for order feature built-in the orders systems (on both Sales Order and Purchase Order system); you have an option to process a receipt from the Sales Order system when a deposit has collected, or a payment transaction once a deposit has paid for the purchase order. Unlike the Purchase Order system, which allows generating a Prepayment Invoice, Sales Order only has processes for ‘Receive deposit for order’ and ‘Ship goods with invoice’. That is, MoneyWorks generates a receipt when you process ‘Receive deposit for order’ from a Sales Order, and a Sales Invoice recorded when ‘Ship goods with invoice’ has processed.

Therefore, you have to issue a Sales Invoice separately to the customer when demanding a deposit for the order, it debits the Accounts Receivable and crediting the Deposit Received from the Customer account (which is a current liability account). Then, do a receipt with overpayment method when payment received.

How does the overpayment method work?

Assuming you are required to issue a Sales Invoice to a GST registered customer to demand $10,000 deposit for a $30,000 worth of goods ordered.

Setting:
Add a ‘Deposit received from the customer’ account, which is a current liability account type, to the account list. Then, create a deposit item if you are using product item in invoices. In the product window, link the ‘Deposit received from the customer’ account to the income field of the product to allow it to use in Sales Invoice transaction.

deposit item

Step 1: Sales Invoice
Record a sales invoice for the deposit of $10,000 (use the deposit item which you have created or use the ‘Deposit received from the customer account if you are not using the product feature in MoneyWorks). The invoice debits the accounts receivable 10,7000, credit deposit received from the customer 10,000 and credit 700 to the GST received (output) account.

Deposit for order invoice.png

Step 2: Receipt
Do not apply the deposit collected to any Sales Invoice when recording the Receipt, leave the receipt as an overpayment so to keep it in the ageing report.

Overpayment

Although no invoices have offset, the receipt still debits the Bank 10,700 and credits the accounts receivable 10,7000.

The Statement of Account shows both the Sales Invoice and Receipt from the customer with a statement balance zero.

Statement with overpayment

Besides, the invoice and receipt, the overpayment, shown in the ageing report.

Ageing with overpayment

Step 3: Sales Invoice
The deposit amount which you have invoiced earlier has to deduct from the final invoice (can be after the last detail item). The invoice debit 10,000 to the deposit received from the customer account, debit accounts receivable 21,400, credit Sales 30,000 and credit GST received (output) 1,400.

Sales Invoice

Ageing with final invoice.png

Step 4: Receipt (contra)
The accounting system will prompt to apply the ‘surplus’ when an overpayment is detected. Click ‘Use Previous Surplus’ button when prompted and enter the amount applied to the invoice in the following window.

Apply surplus to invoice

Allocate surplus

Step 5: Receipt
After the surplus applied to the invoice, MoneyWorks will bring you back to the Receipt which you intended to record. Then, enter 21,400 in the amount received, assuming the customer has settled the outstanding in full, and offset it against the invoices listed.

Receive payment

The statement of account shows all the invoices and receipt.

Statement - final.png

 

Ledgers:

Deposit received from the customer

Credit Invoice (Step 1): 10,000

Debit Invoice (Step 3): 10,000

 

Accounts Receivable

Debit Invoice (Step 1): 10,700

Credit Receipt (Step 2): 10,700

Debit Invoice (Step 3): 21,400

Credit Receipt (Step 5) 21,400

 

GST Received (Output tax)

Credit Invoice (Step 1): 700
Credit Invoice (Step 3): 1,400

 

Bank

Debit Receipt (Step 2): 10,700
Debit Receipt (Step 5): 21,400

 

Sales

Credit Invoice (Step 3): 30,000

 

Note:
1. Click here for the advances paid to the supplier.

2. Click here for the advances received from a foreign currency customer.

3. This method does not require to process a ‘Receive deposit for order’ from the Sales Order if you are using the Order system since a receipt (step 2) has already recorded into the MoneyWorks accounting system.