Overview

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.

Configuration

Required parameters

Fields	Description
`date`	calendar date of when the tax item is issued
`amount`	full amount of the tax item to be collected

Required accounts

Account	Description
`ar_account`	debit account for tax collection. e.g. Accounts Receivable
`tax_payable_account`	credit account for tax collection. e.g. Tax Payable
`cash_account`	debit account for tax payment. e.g. Cash

Walkthrough

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

Date	Account	Debit Amount	Credit Amount
01/01/2022	`ar_account`	$1
	`tax_payable_account`		$1

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.

Date	Account	Debit Amount	Credit Amount
01/01/2022	`cash_account`	$1
	`tax_payable_account`		$1