Quicken & Other Budget/Accounting Software/Split tax paid on purchases

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Question
Hi,

We received invoice for payment as below :

Editorial Fee     $ 5,000
6 % Tax          $   300

Total Bill amount  $5,300

Should i enter the total bill above as $5,300 or make a remark when entering the $5,000 amount as taxable of 6%?

Which is the right way to enter this invoice?

Answer
Here is the USA we treat tax on purchases as part of the acquistion cost and
we do NOT classify the sales tax to another account.   So in the above example
we would post $5300 to editorial fee expense.  

You would need to research your local rules.  
For example, In Europe they have a Value added Tax (VAT)
on certain purchases which can be netted against sales tax collected.

http://en.wikipedia.org/wiki/European_Union_value_added_tax

Therefore in the case of VAT tax  it would be important to track the tax paid separately
(posting to the sales tax liability account- or subaccount).
If your location has a similar type of taxation, then you would split the
expense.


Linda Saltz, CPA
Advanced Certified QuickBooks Advisor
http://www.qbalance.com  

Quicken & Other Budget/Accounting Software

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Linda Saltz, CPA, QBalance.com

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QuickBooks best practices, troubleshooting, accounting, tax We have over 70 pages of website content about QuickBooks tips, running a business, tax and business startup at http://www.qbalance.com

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Accountant and CPA over 20 years. Specializing in accounting software for over 12 years, Certified QuickBooks Pro Advisor, QuickBooks seminar instructor since 1997.
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