It is a legal requirement in some countries that sales accounts are posted including tax and that the tax is simultaneously posted as an expense with COA analysis that matches the sales posting. This practice is called gross income accounting.

In gross income accounting, indirect taxes are added to sales and then deducted as a tax expense in the profit and loss account. Sales are recorded in the general ledger gross of tax and then the tax amount is expensed through the profit and loss account.

When gross income accounting is enabled in Financials, Invoice Post and Print (7.13.4) creates an additional posting when the sales invoice uses specific sales and tax account combinations. The additional gross income accounting posting debits the tax expense account and credits the sales account with the tax amount. For the invoice example above, the following is the additional gross income accounting posting:

You enable gross income accounting at entity level. You must also define the groupings of sales accounts and tax accounts for which gross income accounting applies using Gross Income Acctg Create (25.3.25.1). Gross income accounting postings are only created for postings to the official or management layers and not the transient layer.