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User Tips
A quarterly feature from WON Systems geared towards enabling users to make full use of their Agency Business Software Solution.



Tip 3

How to track Canadian GST/PST collected and GST tax inputs using Clients & Profits.

Recording the Canadian Goods & Services Tax (GST) & Provincial Sales Tax (PST) that you collect from your clients and the GST tax that you pay to your vendors is a simple process using your Clients & Profits software. At any point in time you can easily determine your GST/PST liability for all posted transactions. PST follows the same steps as GST and the only differences will be highlighted below in step six.

The following steps will assist you to automate your sales tax tracking process:

1. Create two general ledger accounts for your GST:
The most common practice is to setup two separate general ledger liability accounts for tracking GST:

  1. Revenue collected general ledger liability account – this will track all the client sale GST amounts.

  2. Input Tax Credit (ITC) general ledger liability account – this will tack all the ITC amounts paid on your expenses which will usually offset the amounts in 1. (a). If you are generally in a debit position on GST (i.e. you have significant out of province/country sales) you may want to classify these two accounts as assets.

When you prepare your GST return you can then print the above accounts (make them consecutively numbered for easier printing) together and produce a listing of the two sub-totals and a net grand total which is required for the GST return.

When you issue the GST cheque you would then clear both accounts in the distribution of the cheque using the dGL (since the net difference of the two accounts is the credit to cash). If it’s a refund you could then post it to a miscellaneous accounts receivable until paid.

Finally, you will need to ensure that the GST is setup properly in Setup/Preferences/Sales Taxes. You should designate a name, rate and GL account for revenue collection.

2.   Tasks & Job Tickets:
  1. In the Setup/Preferences/Sales Tax section of the software you will want to setup GST usually as "Sales Tax" and the rate at "7"%. You will also point it to the General Ledger account that you created in point 1 above for your revenue.

  2. Next, in the Setup menu under Task Table - you would "X" off the relevant GST box. GST will be applicable on everything and hence you will need to do this on all your tasks. If you are changing tasks that are already on open dockets, you will want to “X” off the "Update Existing Job Tasks" at the bottom of the window.

In the situation where the client is GST exempt this should be handled in My Menu under My Clients. The applicable client would then have their "Billing Information" adjusted such that the GST rate was 0% and hence would override the task setup.

3.   Accounts Payable:
When you enter invoices from your vendors, the amount of GST is input as a separate line item using NONE as the job ticket – no need to use a task. Remember to use the GST ITC account for the dGL for the job "None" distribution line on the A/P invoice. Every invoice for a job cost that includes a GST amount (out of country invoices will not require it) will be distributed over at least two lines - the job cost task and the GST line. The steps are as follows:
  1. Choose Add New Invoice in Accounts Payable.

  2. Enter a payable per the directions in the manual and finalize by proofing and posting.

  3. The GST paid will show up in the general ledger once the invoice is posted and will not show up on the job as it's a recoverable expense to the agency.

4. Accounts Receivable:

The invoicing section of accounts receivable is the most automated area as it relates to tracking your GST. When you enter invoices for your clients, the amount of GST is automatically calculated for you based on its inclusion in the task setup. Since everything is still modifiable at the pre-post invoice stage, any modifications can still be made to GST applicability (i.e. exempt status etc.). The steps are as follows:

  1. Choose "Add New Invoice" in Accounts Receivable.

  2. Enter client invoices per the directions in the manual.

  3. Proof and post as directed in the manual.

  4. The GST collected will show at the bottom of the invoice and in the general ledger once the client invoice is posted.

5. General Ledger:

As soon as an accounts payable or accounts receivable transaction with a GST amount is posted, the general ledger total for the GST account will be updated automatically.

Use the financial reports Under Snapshots or the audit trail in the General Ledger section to see totals and details about your GST liability at any time.

6. PST Differences:
  1. There are no Accounts Payable aspects to PST as there are no ITC's present. In the majority of cases the PST is not chargeable from your vendor to you on goods for resale to your client.

  2. In the case where you are inputting overhead invoices where PST is applicable, the most often used procedure is to add the PST to the cost of the related expense line (i.e. computer supplies or professional fees...) rather then doing a separate line.

  3. PST applicability varies between provinces and attention should be given to correctly applying it to the right costs in order to avoid both overcharging your client as well as possibly becoming responsible for undercharged PST in the future. When you determine what PST applies to, you can assign that tax to the relevant tasks in the Setup/Tasks section. By "X"ing the Sales Tax 2 Box in Setup/Tasks this will automatically assign the task to the right revenue when billed.

    Also ensure that the PST is correctly named, has the correct rate and is going to the right GL account in Setup/Preferences/Sales Taxes.

  4. In certain situations you may be responsible for submitting PST for other jurisdictions. In those cases C&P can track your liability through the following steps:

    1. Setup another general ledger account for this PST liability.

    2. For the clients that have this PST liability, and not your Province's own, replace your new general ledger # in the "My/My Clients/Billing Info/Rate 2" with the local province PST General Ledger Account #.

    3. When it comes time to submit that out of province tax you need only issue a cheque, as described in point one, using that particular PST general ledger account number.

  5. Finally, in rare occasion where an alternate sales tax name may need to be used, this can be changed temporarily in the Setup/Preferences/Sales Taxes. Once the invoice is printed it can be returned to the original name.


APPENDIX – GST/PST Alternative Method:

Create a task for GST/PST: In rare situations you may have to create a task for GST/PST. The formatting of the invoice for the client may one situation. The procedures would be as follows:
  1. This task may have any code, but GST/PST is a simple one to use. Whatever description you input for the task name, it will appear on the client invoices.

  2. The cGL (revenue) and dGL (costs) will be the two chart of account numbers for GST/PST that you set up in your general ledger. All other task information may be left blank; or, if you use the group and sort features, designate the GST task with an appropriate group and sort so that it will appear as you want on your Accounts Receivable invoices.

  3. You may input the GST/PST task at any time. If you DO NOT want it to appear on an estimate/invoice, enter the GST/PST task after the final estimate has been printed for the client or mark the "X" in "Estimate Options" to "Hide Tasks with no Estimates".


For detailed instructions on the "alternate method" please refer to the Clients & Profits website - http://www.clientsandprofits.com/support/FAQs/tech_notes/technote_GST.html.
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