PO for Inventory Item with Tax Rate Change
In this example, you purchase a quantity of 10 of item A, which has a standard cost of $100. Tax is accrued at receipt and is charged at 20%, of which 80% is recoverable. The tax account used for recoverable tax for the receipt postings is 10200. The full quantity of 10 is received.
You are invoiced for 1 item at $150, giving a price variance. The tax rate used at receipt has expired and a new rate is selected on the receiver line. The new rate retains the account settings of the previous rate, and recoverable tax is posted to a different tax account, 10202.
You select the new tax rate on the receiver line. The new rate is 21%, of which again 80% is recoverable. The system recalculates the tax amounts and there is a difference between receipt amounts and amounts due at invoice, which means the original tax postings are reversed for the amounts received.
Receipt Postings
The recoverable tax amount is calculated as:
Price * Quantity *% Tax * (% Recoverable / 100)
The non-recoverable tax amount is calculated as:
Price * Quantity *% Tax * (% Non-Recoverable / 100)
Invoice Postings
One item has been invoiced at a price of $150 at 21%. The debit amounts are calculated as follows:
Price Invoiced * Quantity Invoiced * (% Tax + 100)
Matching Postings
The matching postings include:
• A credit to the Unmatched Invoices account for the invoice amount.
• The reversal of the recoverable and non-recoverable tax postings for the quantity invoiced. In this case, 10% of the tax postings are reversed.
• New recoverable and non-recoverable tax postings for the quantity received at the new tax rate of 21%.
• A debit of the AP Rate Variance account for the price variance of $50.
• A debit of the PO Receipts account for the quantity invoiced.
