Tax Handling


When customers purchase a product or a service, usually a tax is charged on top of each line-item, or to the entire invoice. We need to create tax journal entries to distinguish taxes collected from the sales amount.


Required parameters

datecalendar date of when the tax item is issued
amountfull amount of the tax item to be collected

Required accounts

ar_accountdebit account for tax collection. e.g. Accounts Receivable
tax_payable_accountcredit account for tax collection. e.g. Tax Payable
cash_accountdebit account for tax payment. e.g. Cash


John bought a hat from Amazon. The hat cost $10, and a 10% tax will be collected by Amazon.

Event #1: tax is invoiced

Amazon issue an invoice showing the cost of the hat, and the tax to be collected, expecting John to pay after receiving the invoice. The following shows the JE for tax portion of the invoice

DateAccountDebit AmountCredit Amount

Event #2: tax is paid

John received the invoice and paid immediately so he can receive his hat. The following shows the JE for tax portion of the invoice.

DateAccountDebit AmountCredit Amount