Sales are booked at gross (including sales tax). Sales tax is backed out at the end of the month by entering the sales tax liability amount when closing the journal. This posts an automatic journal entry with a debit to Sales Tax Expense (this is defined in Standard Account Codes). The Sales Tax Expense account code should be a contra sales account (same account code parameter as sales). On the income statement RFMS will show gross sales, less sales tax expense, netting to net sales.
Inventory is accounted for on a perpetual basis, therefore all purchases of inventory should be booked to the asset account for inventory (defined in Standard Account Codes). When a job is job costed, the Cost of Material account is debited and the Inventory asset account is credited. RFMS has only one Cost of Material account and one Sales account. The Material Analysis Report and the Delivered Sales Analysis report will give a breakdown of Sales and Cost of Sales by product code, i.e. Carpet, Vinyl, Wood, etc. and journal entries can be made to separate them on the financials
An very important System Option when it comes to Sales Tax Accounting is Setup Sales Tax Accounting. Click here to go to a detailed article on this System Option.
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