Maya asked when to use either inclusive or exclusive of tax when recording transactions.
In this week’s video blog I walk through the options for both when recording expenses and invoices to customers.
If you have any questions, or would like further assistance with understanding sales tax in QuickBooks (or anything else for that matter!) please don’t hesitate to reach out.
Hi Kerry here from My Quick Bookkeeping. I have a question from Maya about recording transactions using the two options, inclusive of tax and exclusive of tax.
So what we’re going to do today is walk through an example of an expense and an invoice using both of the options.
Okay, so let’s start with an expense. Here I have a receipt from the Home Depot; we can see here that the total amount before tax was $100. 46 cents and then we have GST and PST because this is a BC company, to a total of $112. 51. Let’s pop this out of the way for a moment. We’re going to go here to add an expense from the Home Depot, added in here, it was paid by credit card. Let’s just leave that date and this was cost of goods sold for our event planning company here in the sample company. So the sales tax—first of all let’s enter into this amount which was 100.46 and we will tell if it’s GST and PST here in BC and the amount comes to that 112.51, just like we had for our receipt, which of course we could store here. I could attach it here and have it for whenever I needed it.
Now this is when it’s exclusive of tax, the other option is we change this to say inclusive of taxed, we put 112.51 here, being the total. The GST/PST we have to tell it which tax it is and it calculates it correctly. So if we have another quick look here we can see that the GST is $5.02 as it’s been calculated and $7.03 as the PST. So if we’d gone ahead and done this from the very beginning, started again and we’d selected inclusive of tax at the beginning, we would just enter the total and allow it to calculate. So depending on what sort of information you’re looking at, maybe it’s easier just to enter the total, maybe it’s easier to enter the subtotal, but that’s the difference between inclusive and exclusive of tax when you’re you entering in an expense.
So now, let’s do an invoice. So in this situation let’s select a customer who is Andre—oh no, we won’t go with Andres, he’s in Hong Kong. Here we go, let’s go with Cathy here and let’s say that we’ve told Cathy that we’re going to charge her one thousand dollars including tax. So let’s pop here and we’ll go inclusive of tax and we will sell Cathy a celebration for five hundred dollars including tax and she’s in Nova Scotia. So you can see here that it calculates the HST with the total amount being five hundred dollars. Now under normal circumstances, what you would do is you would charge somebody five hundred dollars and then you would add the tax to that and here we would have the amount, it would be five hundred and seventy five dollars. So it’s another different way that you can use the inclusive and exclusive of tax button.
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