| # Example of posting tax amounts on advance payments During the advance payments of purchase invoice procedure, LN creates the financial postings described in the following example. Similar postings are created during the processing of advance receipts for sales invoices. Example transaction
Example | Purchase invoice data
--- | ---
Purchase invoice | INR 100.00
Tax | 10%
Assumption | Transaction types with Negative Amounts Allowed = Yes
CMG Parameters (tfcmg0100s000) | Calculate Tax on Advance Payments/Receipts = Yes
Step 1. Create an advance payment with tax Note: Tax amounts on advance payments are calculated only if you select the Calculate Tax on Advance Payments/Receipts check box in the CMG Parameters (tfcmg0100s000) session.
Debit/ Credit | Ledger account | Amount
--- | --- | ---
Debit | Advance Payment | INR 110.00
Credit | Cash | INR 110.00
Debit | Net Advance Payment | INR 100.00
Debit | Purchase Tax | INR 10.00
Credit | Gross Advance Payment | INR 110.00
. Step 2. Register the purchase invoice
Debit/ Credit | Ledger account | Amount
--- | --- | ---
Debit | Costs | INR 100.00
Debit | Purchase Tax | INR 10.00
Credit | Accounts Payable | INR 110.00
. Step 3. Assign the advance payment to the purchase invoice
Debit/ Credit | Ledger account | Amount
--- | --- | ---
Debit | Accounts Payable | INR 110.00
Credit | Advance Payment | INR 110.00
Debit | Net Advance Payment | - INR 100.00
Debit | Tax on Assigning the Advance Payment | - INR 10.00
Credit | Gross Advance Payment | - INR 110.00
. Related topics To set up tax registration |