Introduction
Welcome to this guide, where we will explore the functionalities of the Tax or Charge fields in the Taxes and Charges table of purchase or sales transactions in Empress. This is a crucial feature to understand as it greatly affects the calculation of your transaction totals and item valuations.
What are the Tax or Charge Categories?
In Empress, you will encounter three types of Tax or Charge fields:
- Total
- Valuation
- Total and Valuation
Each of these categories impacts your transactions differently. Let’s use an example to illustrate: suppose we purchase ten units of an item at an 800 rate. The total purchase amount is 800. The item has a 4% VAT applied to it, and INR 100 was incurred in transportation.
Understanding the Total Category
A Tax or Charge categorized as Total is included in the sum of your purchase transactions but doesn’t affect the valuation of the purchased item.
For instance, if a 4% VAT is applied to an item, it will amount to INR 32 (assuming the item’s base rate is 800). VAT, being a consumption tax, should be added to the Purchase Order/Invoice’s value as it is included in the payable amount to the supplier. However, it should not be added to the value of the purchased item.
When you submit the Purchase Invoice, a general ledger posting will be made for the tax/charge categorized as Total.
Understanding the Valuation Category
A tax or charge categorized as Valuation is added to the value of the purchased item, but it doesn’t affect the total of that purchase transaction.
Using our example, the transportation charge of INR 100 should be categorized as Valuation. This means the value of the purchased item will increase from 800 to 900. This charge won’t be added to the total of the purchase transaction because it is an expense that should not be reflected to the supplier.
When you submit the Purchase Invoice, a general ledger posting will be made for the expense categorized as Valuation.
Understanding the Total and Valuation Category
A Tax or Charge categorized as Total and Valuation is added both to the valuation of the item and the total of purchase transactions.
If, for instance, the supplier arranges transportation but we need to pay the transportation charges to them, the category for the transportation charges should be Total and Valuation. Here, the INR 100 transportation charge will be added to the actual purchase amount of 800 and will also reflect in the total payable amount to the supplier.
Why is this Important?
Understanding these categories and their implications ensures that your purchase and sales transactions accurately reflect your expenses and payables. This can significantly improve the accuracy of your financial reporting and the effectiveness of your cost management strategies.
For more information, tips, and additional resources, please refer to the Empress user manual or contact our support team. We’re always here to help you maximize your Empress experience.