 Zero Accounting Software 2023. Pay sales tax. Get ready to become an accountant hero with Zero 2023. Here we are. First, a word from our sponsor. Well, actually these are just items that we picked from the YouTube Shopping Affiliate Program, but that's actually good for you, because these aren't things that we're just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased, and used ourselves. Bayer Dynamic. Not sure if I said that right, but this is the DT770 Pro 250 OHM Studio Reference Closed Back Headphones. I wear headphones basically every day for a large part of the day. They are important to me. Therefore, I've gone through many different kinds of headphones. I've had these for some time and they've worked quite well. They fit over my ears, but I'm still able to put my glasses on under the headphones. 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Courses which are well organized have other resources like Excel files and PDF files to download and no commercials. Or in our custom zero home page going into the file we set up in a prior presentation, get great guitars. Duplicating some tabs to put reports in like we do every time. Right click in the tab up top so we can duplicate it. Right click in the tab up top so once again we can duplicate it. Back to the tab to the middle accounting drop down. We want to open up the balance sheet. Slightly modified balance sheet we did in the prior presentation. If you don't have that you can open the normal balance sheet tab into the right accounting drop down the income statement. But we're going to open the comparative income statement again if you don't have that you can open the standard income statement. The comparative income statement however comparing the current month February to the prior month January. The balance sheet has been slightly adjusted and that we have some account categories that we put down here with the custom layout down below. Alright so now we're going to be dealing with sales tax and the pain of the sales tax noting that taxes are going to differ depending on your location. However note that taxes in general aren't really new. In other words governments have dreamed up every possible way that they could basically tax people throughout time. It's not like taxes themselves or new or the different kinds of taxes are new. It's just which tax a particular government is deciding to implement in whatever kind of location at any particular time that they think can milk the most money out of the people. Right that's the one that they're going to be going with. So we're talking about United States taxes here in terms of a sales tax which is basically a usage tax type of system. It's going to be applied on a state level as opposed to a federal level meaning every different state has to deal with their own and locality dependent state and local types of sales tax. And the tax happens when we make the sale and then we of course have to collect the tax at that point in time and then give the tax money to the government periodically. Now we tried to make the taxes the sales tax a little bit generic here just to give a general idea of a usage type tax a sales types tax because we don't want to make it too specific for a particular location. It's also becoming it's also a little bit difficult to track when the taxes paid or do when you're not working in real time using accounting software. So let's just think about you know let's look at the flow chart. First of all this is a QuickBooks desktop flow chart but we're just looking in terms of the flow of forms and how the sales tax fit into the flow of the forms. Now the sales tax in theory is a government tax not on you the business owner but on the customer. That's what the idea is obviously in economic terms you can argue whether that is actually the case or not but that's the theory. So what happens is when we make a sale to a customer with either you know at the point of sale or with an invoice when we're billing the customer those are usually our sales forms or possibly we could have like a well those are the two sales forms usually we're collecting the money at that time or we have an invoice that we are creating then we're also going to be charging the customer the sales tax. Sales tax in theory isn't our charge and therefore we're not going to record it as revenue but instead as a payable type of account accumulating the liability at that time and then we're going to have to give that money to the government or whoever's whoever's given us protection we're paying them protection money whoever's shaking us down you know so we're going to go back on over and see what that looks like. So if I go into say like the income statement and I go into our sales tab and let's drill down on the sales number to just look at a sales form to recall what this looks like. And we're going to say let's say that in here we have an invoice let's just pick up an invoice at the beginning or here's a receive money form. Let's pick that one up. All right so what is here's the sales tax on down below that's being calculated. So what is this doing when we record it. We have an increase to the sales that we charged which is this one thousand two hundred and one thousand for a total of two thousand two hundred and that's what's increasing the revenue. But we also had to charge this other in our case 5% which we broke out between local and state of the 88 and 22. That's not going to go into revenue but rather it's going to go into a liability account and we're basically being forced to act as the tax collector in this case to collect that money. So it's going to increase the liability account and then we're going to collect the two thousand three ten which is what's actually being deposited into our checking accounts. Now just note that you can imagine a system where you're going to say well why don't I just record the two thousand three ten as revenue and the sales tax is an ordinary and necessary expense of doing business. And therefore I would just have an expense there instead of having this sales tax payable account being involved. And one reason we don't do that in theory is because this amount isn't actually our revenue we're just collecting taxes it's supposed to be taxes on the client on the customer. So we don't want to include it in revenue. Now the reason that becomes important is because oftentimes at the end of the year if you do taxes in the United States you often get this question from clients or yourself. You're going to say hey I paid all this money to sales taxes why don't I have a sales tax expense account as a deduction for taxes. You don't have it because we didn't record the revenue related to sales tax as taxes either both the revenue and the expense side having been reported on the payable account. So you need to be able to explain that to yourself and others because the question will likely come up. All right so then I'm going to go back and back and then if I go to the first tab here you'll recall we turned on the sales tax by going to the accounting drop down. We went to advanced here and we went into the taxes and you could have the taxes based on your location but we just put in for the practice problem our generic five percent tax or it's a little bit generic in the problem. So when you turn on the taxes you've got to turn it on by location that we did in a prior presentation and then you need to set up your items the things that you're selling which is your products and services business products and services. And tell the system which of these products and services in our case we said the products the guitars are subject to tax. So that when you make the sales forms the receive money forms and the invoices it will be able to calculate the tax as you create those forms. That's the general outline note that some customers could be exempt from taxes in which case you might have to go to those particular customers and mark them off as exempt from taxes. And those are the three things that you're going to have to do to set up the taxes. Now we've been collecting taxes. So if I just go to the balance sheet I'm just going to look at this in terms of the balance sheet here and I'm going to imagine that we have to collect the taxes for the month and then we're going to pay it at the end of the month. So we've done two months of data input at this point in time. So that means we collected taxes through January and I'm going to imagine we have to pay those taxes in February. So if I scroll down for example to the liability account we've got the 4008. So if I if I go into the 4008 then this is how much we owe as of the end of February but I only want to pay up through January at this point in time. That's what's due. So so here's the information for January and February. So if I go and these of course are the invoices that are helping to generate the actually this is the accounts payable. What am I doing back wrong number wrong number. Pull it together. You confused me. Now it's all over. I'm not going to understand it now. You messed me up sales tax. This is the sales tax form. So if I go into the sales tax form or number or GL transaction report then these are going to be invoices and the sales receipts. So this went up through January here. So in terms of our running balance this is the amount that we might owe in February. Right. And then we're going to let the running balance for February continue to accumulate upward would be the general idea. So we are in essence going to write a check for the sales tax that has accumulated up through January in our practice in our practice problem. I'm just going to do that with like a normal kind of check or money out spend money type of form. I'm actually going to do two checks which hopefully add up to this amount because I'm going to break out the locations between the local and the state in accordance with what I have in my practice problem. Because in essence I want the bank feeds to tie out when we get to the bank feeds in a future course or section. All right. So I'm just in essence going to write two checks or have money out type forms. So I'm going to go let's go to the drop down and we're going to say spend money. More money is being spent coming out of the checking account going to the government. More money is being spent going to the government. And so this is going to I'm going to call this the city. I'm going to make a city tax California. I'm just making a generic. This is who I would have to pay and you know I'm in California. So this isn't the actual state tax sales tax collection place. But I'm just making it generic. That's the point. This is going to be as of the end of Feb Feb 28 Feb 28 is the date. I'm going to make it a check and then I'm going to go down and say that this is going to go to. I'll just say this is going to pay for Jan sales tax. And I'm going to make this amount for one eight seven five point oh nine. And it's going to go to the sales tax liability account decreasing that liability account. All right. So what's this going to do? It's going to be a money spend money form decreasing the checking account. The other side going to the liability account not an expense account decreasing the liability account. All right. And I'm going to I'm going to write another one as well. So I'm going to save and another. Thank you state for taking my money. May I have another and we're going to say save. And the state's like yeah you're looking to hit it. You can have another we can hit you all night long with taxes. We can tax you till the moon and back. So this is going to be let's call this the state sales. Tax California and we'll make another tab on that one. So we have the city and state is this is a generic vendor. But that's the idea we're going to bring this back to February 28. And this is going to be one and four sixty eight point seven seven. Once again sales tax the pay the liability account is the account that we're going to hit on that one. So this will be a check decreasing the cash account other side going into the liability. Let's save it and that have you had enough. Have you had enough now. I'll tell you when he's had enough. I've had enough. No more taxes. We're going to go then. Okay. Let's go to the balance sheet. We scroll down on the balance sheet. We've got the checking account. If we go into the checking and check it out. We're going to scroll down and we see of course the two checks that we have written. So here they are right there. Boom boom. And then I'm going to go back up and then the other side not going to the income statement but rather decreasing the liability for sales tax. So if I go down there's the sales tax. We're down to five five three sixty nine. It didn't go down to zero. We didn't pay the full amount off because we only paid the amount off for January. So if I go into that we can see the detail. So I'm going to say all right let's check it out then scrolling down. We see the activity. We owed at the end of the January that two three four three eighty five. So let's pull out the trustee calculator just to check out some stuff here trustee calculator. We have these two payments we made down here one eight seven five point oh nine plus four sixty eight point seven seven. And that adds up to the that two three four three eighty five. It's off by a penny but that's cool. That's just rounding man. That's just rounding. So then the sales that we made in February we have not yet paid yet right. So that's going to be this one one oh plus one oh four point seven plus two four four plus six five plus three zero. There's the five the five five three sixty nine off by a penny. That's cool. That's not I'm not going to let that bother me even though I'd like it to be like why why is it okay. It's okay. It doesn't need to be perfect. So in any case that's what we'll pay for February sales that happened. I'm going to go back that happened in. We'll pay it in March for the sales that happened in February. Notice on the income statement again we didn't we paid that money and you're going to say well why don't I have an expense for it. Why don't I have an expense. I should get a deduction for my income taxes and if you're in the United States. No because you didn't record the revenue in there either. If you have a system where you did record the revenue in sales then you got to figure something out because you in essence you should remove the revenue from the sales. But generally the idea would be that both the revenue and the expenses are off income statement on balance sheet in the sales tax payable account. That's the idea. That's the idea. Let's open up the trial balance and see where we stand at this point in time tab until the right accounting drop down. We want to go into the reports and type in trial balance to call up the trial balance. You just type in its name and the trial balance appears. You got to be careful with what you type into the magic keyboard things just show up once you type it in there. And so we're going to say this is going to go custom date two thousand twenty three and OK update it. So that's what we have. And if your numbers tie up to these numbers great. If not if you were in balance last time or you tied out to us last time you were on before but you're off now then what we change we change we made a change to the checking account. And we made a change to the sales tax account. You would think those would be the adjusted amounts so you can you can expand the date range see if that's a date issue and then drill down to the source documents and possibly make changes to correct whatever needs correcting from there.