adjustments not showing in tax cash mode

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I am hoping to have better luck of someone understanding my problem here as I have been communicating with support for about a month and still have not solution.  My adjustment notes are not showing up in my GST summary or tax transaction code reports when I am in cash mode, I have changed date range to 1/1/16 - 8/8/17 and not one adjustment is shown.  My tax is cash basis so I can not have it in accrual mode and this seems to be the only time that the adjustments show up.  I know that my BAS is not because the adjustments have gst on them.  Has anyone else had this problem and found a solution. Thanks
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Jodie

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Posted 2 years ago

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Linda Putland, Accredited Partner

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Hi Jodie, I believe your adjustment notes will only be included if they have been applied to a tax invoice, AND if that tax invoice has been paid...  and even then, the period it will show in will depend upon the dates of the adjustment note/payments, I think?
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Jodie

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Hi Linda,
                I am going to explain a bit more in the hopes that you can help me. Invoice is created on 15 June has $3.18 gst included, adjustment in created and applied to that invoice on 15 June and has $56.75 include which should make gst -$53.57. Account is paid on 10 July so when I create report Toogoolawah Kindergarten Association Inc. For 1 June to 31 July 2017, cash basis the $3.18 gst shows up but no where is the -$56.75 gst from the adjustment note it only shows up if I put my book into accrual in tax section which our kindergarten is not set up as that with ATO.  I tried to find a way to attach both reports but was not able to figure it out.

Thanks

Jodie
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Jodie

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I should also let you know I am on Reckon One, when I was using Reckon Hosted they used to show in cash basis
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Qwerty

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24/08/17

Hi Jodie,

In R1, reporting on cash basis will show physical exchanges of payment, where the company physically receives money or where the company physically pays money.


Case 1: An invoice is linked to a receipt.

Invoice details
Gross $110.00
Net $100.00
Tax $10.00

Receipt details
Gross $110.00
Net $100.00
Tax $10.00

In this case the physical exchange reported is: Gross $110.00, Net $100.00 & Tax $10.00


Case 2: 100% of the invoice is linked to 100% of the customer adjustment note.

Invoice details
Gross $110.00
Net $100.00
Tax $10.00 

Customer adjustment note details
Gross $110.00
Net $100.00
Tax $10.00

In this case there is no physical exchange to report.


Case 3: A portion of the invoice is linked a customer adjustment note & a portion of the invoice is linked to a receipt.

Invoice details
Gross $110.00
Net $100.00
Tax $10.00

Customer adjustment note details
Gross $66.00
Net $60.00
Tax $6.00

Receipt details
Gross $44.00
Net $40.00
Tax $4.00

In this case the physical exchange reported is: Gross $44.00, Net $40.00 & Tax $4.00
 

Case 4: A portion of the customer adjustment note is linked an invoice & a portion of the customer adjustment note is linked to a payment.

Customer adjustment note details
Gross $110.00
Net $100.00
Tax $10.00

Invoice details
Gross $77.00
Net $70.00
Tax $30.00

Payment details
Gross $33.00
Net $30.00
Tax $3.00

In this case the physical exchange reported is: Gross -$33.00, Net -$30.00 & Tax -$3.00
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Jodie

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Hi Qwerty, I think I understand what you are saying but in my case it is the following

Customer adjustment note details
Gross $699.20
Net $642.45
Tax $56.75

Invoice details
Gross $785.00
Net $781.82
Tax $3.18

therefore my tax is -$53.57. Does that make sense?

Thanks
Jodie
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Qwerty

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Q1: Is there a another transaction linked to the invoice?
Q2: Are you applying the whole customer adjustment note amount ($699.20) against that invoice?
(Edited)
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Qwerty

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Using the two transaction examples you provided

Case 5: A portion of the invoice is linked an 100% of a customer adjustment note & each uses different tax amounts.

Customer adjustment note details
Gross $699.20
Net $642.45
Tax $56.75

Invoice details
Gross $785.00
Net $781.82
Tax $3.18


In this case there is no physical exchange to report when using cash basis, as no money has exchanged hands.

If you were reporting on accrual basis then you'd expect

Net profit: $139.37 ($675.07 - $535.70)
Tax: $-53.57 (-$56.75 - $3.18)

So whilst i'm not an accountant, I can see that you are linking an invoice with a customer adjustment note where they use different tax amounts. This seems to create a loophole when reporting on cash basis. This is probably a question for someone with an accounting background to confirm the expectation when using cash basis reporting.
(Edited)
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Qwerty

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Seeing that these two transactions have different totals & different tax amounts it would seem that there would be more transactions that make up the complete scenario.

For example, does the customer adjustment note actually relate to the invoice mentioned or to a different one? And did the customer pay the invoice that the CAN relates to?
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Jodie

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Hi Qwerty,
                  yes the customer made a payment of $85.80.  My confusion is why reckon one does not recognise the negative gst amount however hosted accounting system did in cash basis and I have the reports that i kept before I changed systems? Therefore I believe that it is a system error.  Thanks

Jodie
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Qwerty

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29/08/17

Hi Jodie,


Yes cash reporting is working differently in each application which is why you are seeing different amounts
 - Reckon One is showing physical payments in a cash report which is why you are seeing tax of $3.18 for the 3 transactions provided.
 - Reckon Accounts is showing both physical payments & non-physical payments in a cash report which is why you are seeing tax of -$53.57 for the 3 transactions provided.

Whilst both reports are working differently, they are giving the correct results based on how they work. I think the answer to your question lies in knowing the complete example vs only knowing a portion of it.

I know of these 3 transactions: 

Invoice
Gross $785.00
Net $781.82
Tax $3.18
 
Customer adjustment note
Gross $699.20
Net $642.45
Tax $56.75
 
Receipt 
$85.80
 

What I don’t have is the prior transactions. Starting from a point in time where the customer had no outstanding amounts. What are the transactions entered for this customer leading up to the current 3 you provided? 

Once I have this information I should be able to replicate in both applications to hopefully be able to answer your question/problem.
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Jodie

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the account started back in November 2016 I can go through and get all of that information but the amount outstanding on the 14th of June was $0.00, account and adjustment were added on 15th of June and payment was made on 10th of July.  Please let me know if you would like all of the information back from November and I will sit down tomorrow at work and compile it.  Thanks for your help I do appreciate it.
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Qwerty

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The reason why I’m asking for the prior transaction information is because from an accounting point of view, something is not right when only taking these 3 transactions into the picture.
 
A customer adjustment note reverses the amounts from another transaction. It’s either reversing a portion of another transaction or the whole amount of another transaction.
 Case 1: Full refund - If the customer adjustment note is reversing a whole invoice for example, the amounts (gross, net & tax) would match between the customer adjustment note & the invoice.
Case 2: Portion refund - If the customer adjustment note is reversing a portion of an invoice for example, the customer adjustment note amounts (gross, net & tax) would be using a portion the invoice amounts.
 
In your example the tax on the customer adjustment note is much higher than the tax amounts on the invoice it’s linked to. This is where I think the problem lies.
 
So my thinking is that either:
a) This customer adjustment note is reversing the amounts from a different invoice in the book other than the one you are applying it to. If this is then we need to factor this other invoice into your example & into the expected results.
b) If the customer adjustment note does apply to the invoice mentioned in the example, why is it that the tax is more on the customer adjustment note than on the invoice. This doesn't line up with either of two cases mentioned above?
(Edited)
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Jodie

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Hi Qwerty,
                 sorry this is a very unique situation and very messy.  The reason that the adjustment notes gst is more than the invoice is because this is government funding that we get reimbursed for, so the amount we are reimbursed includes that amount of gst so that is the amount which I have to include in my adjustment note and refund the customer, maybe there is a better way to do it.  But I can not put a negative amount into the invoice so this was the only way I found to do it.

So from what my Reckon one report is showing me

Invoice gst - $3.18
government reimbursement gst - $56.75
total gst - $59.93

Hosted report
invoice gst - -53.57
government reimbursement gst - $56.75
total gst - $3.18

I am not sure if I am just confusing myself but I have my old hosted report and the reckon one report is nearly $500 different in gst.  I had to re enter information when I changed systems and now reckon one does not balance with what I paid ato, this is an issue for me.

Thank you for your patience

Jodie
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Qwerty

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01/09/17

Hi Jodie,

I think i’ve wrapped my head around your scenario enough now to be on the same page with you to understand the problem & the resulting question at hand.

I’ll use a less confusing scenario though to recap it. 

Invoice
Gross $110.00
Net $100.00
Tax $10.00

Customer adjustment note
Gross $110.00
Net $100.00
Tax $10.00

When these transactions have been entered but not linked they are unpaid.
- RA tax detail report (cash basis) doesn’t show these transactions
- R1 tax detail report (cash basis) doesn’t show these transactions

When these two transactions are linked they are paid
- RA tax detail report (cash basis) does show these transactions
- R1 tax detail report (cash basis) doesn’t show these transactions

RA tax reports (cash basis) considers this scenario as a cash event  
R1 tax reports (cash basis) doesn’t consider this scenario a cash event

In your particular case, you have non-matching tax amounts for the invoice & adjustment note resulting in a negative tax balance (I’m going to ignore the receipt in your scenario to keep this simple). The RA tax reports (cash basis) is showing the two transactions & giving the negative tax balance. R1 tax report (cash basis) is not showing the two transactions hence you don’t see the negative tax balance.

RA & R1 are giving different results for the same scenario. So the question at hand is whether an invoice linked to a customer adjustment note (e.g. not a physical cash payment) should be considered a cash event in cash basis accounting?
 
I’ve sent this question through to the Reckon team to review.
(Edited)
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Jodie

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Hi Qwerty, "sigh" someone understands me lol..  I hope you have more luck than me as I have been messaging back and forth with R1 team about this since May. Appreciate all of the time you have spent trying to help me.
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Qwerty

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Hi Jodie,

I have a few more questions to help in understanding the scenario a little better.

Q1: You mentioned earlier in the thread that this is a Kindergarten. Does government funding you receive relate to the child care rebate?

Q2: If yes to Q1, does the customer adjustment note in R1 represent the clients rebate?

Q3: If yes to Q2, are you entering the rebate as a customer adjustment note in R1 because the invoice form in R1 doesn't allow you to use a negative line?

Q4: If yes to Q3, in RA did you previously handle this using an invoice with both a positive line & a negative line (for the rebate) & therefore not need to enter a customer adjustment note?
(Edited)
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Jodie

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Hi Qwerty,

Q1: You mentioned earlier in the thread that this is a Kindergarten. Does government funding you receive relate to the child care rebate? - sort of it is QKFS which is Qld  kindergarten funding scheme, it is a little different to child care rebate as that is day care centers. Same principle but.

Q2: If yes to Q1, does the customer adjustment note in R1 represent the clients rebate? - yes

Q3: If yes to Q2, are you entering the rebate as a customer adjustment note in R1 because the invoice form in R1 doesn't allow you to use a negative line? - yes

Q4: If yes to Q3, in RA did you previously handle this using an invoice with both a positive line & a negative line (for the rebate) & therefore not need to enter a customer adjustment note? - no used adjustment note in RA also.

Thanks Jodie
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Jodie

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Hi Qwerty,
                  The other thing that I have noticed is that it does not come off the profit and loss as an expense, so it is not giving an accurate indication in my opinion.

Thanks

Jodie
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Hari Raju

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Has anyone had luck resolving this issue?

I have a similar problem with Reckon One involving an Australian medical practice registered for quarterly Cash basis GST reporting.

Scenario:

Independent medical practitioner contractors have "sales" to clients. The business invoices these sales on behalf of contractor and receives payment from clients; these invoices are GST free (ie should be FRE), although they are entered without a tax code in Reckon due to the way the invoicing software syncs to Reckon One. The business reimburses 100% of sales to contractor as a "Customer Adjustment Note" (CAN) as FRE tax code.

The business then invoices the contractor for service provided (Administration support etc). This invoice has GST due (10%). Any unpaid CAN is applied to the invoice and residual due to contractor is paid out from business bank account.

This keeps all the accounts balanced. However, the GST total from invoices to contractor are not included in any reports of tax code etc. Hence, the BAS summary etc are all incorrect.

The solution may be to create holding accounts for each contractor to make payments in and out rather than use CAN? This seems cumbersome to me as most of my accounts are otherwise fairly simple.
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Linda Putland, Accredited Partner

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I have had a look at your scenario and agree its not working as expected on a cash basis - however, it works perfectly fine when R1 is set to accrual - so just a thought until Reckon are able to look at why its doing this..... given you say that your accounts are fairly simple - have you considered leaving R1 set to accrual - but enter your data on a cash basis?  ie, only enter what is paid and received when its paid and received?  so dont enter bills, just enter payments - or if you want to enter bills, enter them with a date thats in the period you expect to pay them so your tax reports still generate and pick up GST when you expect it to?  might be a short term solution until resolved by Reckon?
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Hari Raju

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Thanks Linda. I will do that for now and will ensure bills are dated and paid within the correct quarter in future. I have emailed Reckon One to request they fix this - 1 year is a long time for this to continue. I will report back if Accrual reporting does not fix the issue.