Indirect Tax Assets

Indirect Tax Assets, numbered 1240, is the group that totals the tax balances the IRD owes the company under the VAT and withholding systems: VAT Receivable for input VAT paid on purchases, and TDS Receivable for income tax customers withheld from the company's invoices. Both children have account type Tax. The group total shows how much of the company's cash is tied up with the tax office until the next VAT return or the annual income tax return claims it back. In the demo books the group is empty because the two Market mind investment group bills carried no VAT; a Rs 40,000 purchase with VAT would have put Rs 5,200 here.

Indirect Tax Assets = VAT Receivable + TDS Receivable.

1. 01Go to Accounts Setup > Chart of Accounts and expand Assets > Current Assets > Indirect Tax Assets.
2. 02Read the two children, VAT Receivable (1241) and TDS Receivable, both of account type Tax.
3. 03Open Financial Reports > Balance Sheet; the group shows what the IRD owes the company.
4. 04Post input VAT through Purchase Invoices with the VAT template and customer withholdings through Payment Entry deductions.
5. 05Never pick the group on a document; the tax templates and deductions point at the children.

Do not post here. Purchase Invoices post VAT to VAT Receivable; customer tax withholdings post to TDS Receivable.

Indirect Tax Assets would show Rs 5,200 input VAT if the Rs 40,000 chairs had been bought with 13 percent VAT.