Tax Summary — Complete User Guide — Two Accounts Web

Comprehensive guide for generating, analysing, and understanding the Tax Summary report — a per-tax-code breakdown of net sales, tax collected, net purchases, tax paid, and net tax liability

Table of Contents

1. What Is the Tax Summary Report?
   • Structure
2. Enabling from the Customize Menu
3. Field-by-Field Guide
   • Report Header Fields
4. Settings Configuration
   • Tax Codes
   • Divisions
5. Creating a Tax Summary Report
6. How the Tax Summary Is Calculated
   • Transaction Loading
   • The Seven Columns
   • Sale vs Purchase Determination
   • Division Filtering
   • Per-Tax-Code Grouping
7. Drill-Down Capabilities
8. Sample Data and Report Output
   • Sample Setup
   • Tax Summary Output
   • Verification of Calculation
9. Common Issues and Solutions
10. Accounting Regulation Compliance

1. What Is the Tax Summary Report?

The Tax Summary report shows a per-tax-code breakdown of sales, purchases, and the resulting net tax liability. For each Tax Code used in the selected period, it calculates the net amount of sales, the tax collected on those sales, the net amount of purchases, the tax paid on those purchases, and the net tax position.

This is the primary report for preparing VAT returns — it directly shows how much output VAT was collected, how much input VAT was paid, and the net amount payable to (or recoverable from) the tax authority.

1.1 Structure

For each Tax Code, the report shows seven columns:

2. Enabling from the Customize Menu

The Tax Summary report appears under:

• Reports → Tax Codes → Tax Summary

The report is only visible when at least one Tax Code has been created in Settings. Once a Tax Code exists, the report appears automatically. No toggle in Customize Menu is needed.

3. Field-by-Field Guide

3.1 Report Header Fields

Location: Reports → Tax Codes → Tax Summary → New Report

4. Settings Configuration

4.1 Tax Codes

Location: Settings → Tax Codes

Tax Codes define the sales tax / VAT rates used by the business. Each Tax Code becomes a row group in the Tax Summary report. The Tax Code's Account field determines which GL account receives the tax amounts.

4.2 Divisions

Location: Settings → Divisions

Divisions allow segmenting the Tax Summary by business unit. When a Division is selected on the report, only transactions tagged with that Division are included. This is useful for businesses with multiple VAT-registered segments or branches.

5. Creating a Tax Summary Report

1. Ensure at least one Tax Code exists in Settings → Tax Codes
2. Go to Reports → Tax Codes → Tax Summary
3. Click New Report
4. Enter a Description (optional)
5. Enter the From Date and To Date
6. Choose the Accounting Method — Accrual or Cash Basis
7. Optionally select a Division for segmented reporting
8. Click Save
9. The report generates showing each Tax Code with the seven-column breakdown and a total row

6. How the Tax Summary Is Calculated

6.1 Transaction Loading

The system loads all General Ledger transactions within the period and calculates Cost of Goods Sold. If Cash Basis is selected, sales and purchase invoices are converted to cash basis. Only transactions that have a Tax Code assigned are included in the report.

6.2 The Seven Columns

Each Tax Code group produces seven values. The calculations use two flags on every transaction: whether it is a tax transaction (the tax portion of an invoice) and whether it is classified as a sale or purchase.

6.3 Sale vs Purchase Determination

Every transaction is classified as a sale or purchase using a five-rule cascade. The system checks these conditions in order:

1. Billable expenses and purchase tax transactions are always classified as purchases
2. Supplier-linked transactions are purchases (unless reverse-charged, which makes them sales)
3. Customer-linked transactions are sales (unless reverse-charged, which makes them purchases)
4. Journal entries with a TaxCode use the JE's "For Tax Purposes This Is" flag to determine sale or purchase
5. Fallback — if no other rule applies, positive amounts are purchases and negative amounts are sales

6.4 Division Filtering

When a Division is selected on the report, only transactions where the transaction's division matches the selected division are included. The division name appears in the report subtitle for clarity.

6.5 Per-Tax-Code Grouping

Transactions are grouped by their assigned Tax Code, then the seven calculations are performed per group. A total row at the bottom sums all columns across all Tax Codes.

7. Drill-Down Capabilities

The Net Sales and Net Purchases columns are clickable. Clicking any amount opens a detailed transaction viewer showing the individual transactions behind that figure.

Each drill-down view displays:

• Date — the transaction date
• Transaction — the document type and reference
• Customer/Supplier — counterparty information
• Description — transaction narrative
• Amount — the base currency amount
• Tax Code — the tax code applied

8. Sample Data and Report Output

8.1 Sample Setup

A trading company uses two Tax Codes — VAT-15 (15% standard rate) and VAT-5 (5% reduced rate). The following transactions occurred during January 2026:

Tax Codes Defined

Transactions During January 2026

GL Posting for Each Transaction

SI Sale (VAT-15):          Dr AR 345,000 = Cr Revenue 300,000 + Cr Tax Payable 45,000
PI Purchase (VAT-15):      Dr Expense 50,000 + Dr Tax Payable 7,500 = Cr AP 57,500
SI Service (VAT-5):        Dr AR 105,000 = Cr Revenue 100,000 + Cr Tax Payable 5,000
PI Purchase (VAT-5):       Dr Expense 80,000 + Dr Tax Payable 4,000 = Cr AP 84,000
CN Return (VAT-15):        Dr Revenue 10,000 + Dr Tax Payable 1,500 = Cr AR 11,500

8.2 Tax Summary Output

Tax Summary — ABC Trading
For the period: 1-Jan-2026 to 31-Jan-2026
Accrual basis

                    Net Sales  Tax on Sales  Total Sales  Net Purchases  Tax on Purchases  Total Purchases  Tax Liability
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
VAT-15               290,000        43,500      333,500         50,000             7,500           57,500         36,000
VAT-5                100,000         5,000      105,000         80,000             4,000           84,000          1,000
                      ───────       ───────     ───────         ───────           ───────          ───────        ───────
Total                390,000        48,500      438,500        130,000            11,500          141,500         37,000

8.3 Verification of Calculation

VAT-15 @ 15%:
  Net Sales:      300,000 (SI) − 10,000 (CN) = 290,000 ✓
  Tax on Sales:    45,000 (SI) − 1,500 (CN) = 43,500 ✓ (290,000 × 15% = 43,500)
  Net Purchases:   50,000 ✓
  Tax on Purchases: 7,500 ✓ (50,000 × 15% = 7,500)
  Tax Liability:   43,500 − 7,500 = 36,000 ✓

VAT-5 @ 5%:
  Net Sales:      100,000 ✓
  Tax on Sales:    5,000 ✓ (100,000 × 5% = 5,000)
  Net Purchases:   80,000 ✓
  Tax on Purchases: 4,000 ✓ (80,000 × 5% = 4,000)
  Tax Liability:   5,000 − 4,000 = 1,000 ✓

CROSS-VERIFICATION WITH GL:
  Total output VAT (Cr Tax Payable):  45,000 − 1,500 + 5,000 = 48,500 ✓
  Total input VAT (Dr Tax Payable):    7,500 + 4,000 = 11,500 ✓
  Net VAT payable:                     48,500 − 11,500 = 37,000 ✓

DR = CR (all transactions):
  SI (VAT-15):        Dr AR 345,000 = Cr Revenue 300,000 + Cr Tax 45,000 ✓
  PI (VAT-15):        Dr Expense 50,000 + Dr Tax 7,500 = Cr AP 57,500 ✓
  SI (VAT-5):         Dr AR 105,000 = Cr Revenue 100,000 + Cr Tax 5,000 ✓
  PI (VAT-5):         Dr Expense 80,000 + Dr Tax 4,000 = Cr AP 84,000 ✓
  CN (VAT-15):        Dr Revenue 10,000 + Dr Tax 1,500 = Cr AR 11,500 ✓
  Total Debits:       345,000 + 57,500 + 105,000 + 84,000 + 11,500 = 603,000
  Total Credits:      345,000 + 57,500 + 105,000 + 84,000 + 11,500 = 603,000 ✓

9. Common Issues and Solutions

9.1 No Tax Codes Appear

Cause: No transactions with a Tax Code were found within the selected date range, or no Tax Codes exist in the system.

Solution: Verify that Tax Codes are defined in Settings → Tax Codes and that invoices have been created with a Tax Code selected on line items.

9.2 Division Filter Shows No Data

Cause: The selected division has no transactions with Tax Codes in the period.

Solution: Remove the Division filter to see all divisions. Verify that transactions are tagged with the correct Division.

9.3 Net Sales or Net Purchases Show Negative Numbers

Cause: Credit notes or returns exceeded sales/purchases for that Tax Code in the period. The system correctly shows the net position, which may be negative.

Solution: Check for credit notes or debit notes that reduced the net amount. This is correct behaviour — the report shows net activity, not gross.

9.4 Tax Liability Shows Negative

Cause: Tax on Purchases (input VAT) exceeded Tax on Sales (output VAT) for that Tax Code. This means you have recoverable input tax — the tax authority owes you.

Solution: This is correct. A negative tax liability means a refundable or carry-forward position. Verify your input VAT claims are accurate.

9.5 Amounts Include Tax — Misunderstanding

Cause: The Tax Summary always shows net (tax-exclusive) amounts in the Net Sales and Net Purchases columns, and tax amounts separately in the Tax on Sales and Tax on Purchases columns. This is the case regardless of whether your invoices are created with tax-inclusive or tax-exclusive pricing.

Solution: The system always separates the tax portion from the net portion internally. The Net Sales column always reflects the revenue before tax, and the Tax on Sales column shows the tax component.

9.6 Cash Basis vs Accrual Basis Differences

Cause: Under Accrual Basis, tax is recognised when the invoice is issued. Under Cash Basis, invoices are converted to cash basis — tax is recognised when cash is received or paid.

Solution: Generate the report with both methods and compare. Differences indicate timing gaps between invoicing and payment. Use Accrual Basis for VAT return preparation; use Cash Basis for cash flow analysis.

10. Accounting Regulation Compliance

10.1 IFRS 15 — Revenue from Contracts with Customers

10.2 IAS 12 — Income Taxes

10.3 NBR VAT Act 2012 (Bangladesh)

10.4 DR = CR Verification

Sample Data Verification:

  VAT-15: Net Sales 290,000 × 15% = 43,500 Tax on Sales ✓
          Net Purchases 50,000 × 15% = 7,500 Tax on Purchases ✓
          Liability: 43,500 − 7,500 = 36,000 ✓

  VAT-5:  Net Sales 100,000 × 5% = 5,000 Tax on Sales ✓
          Net Purchases 80,000 × 5% = 4,000 Tax on Purchases ✓
          Liability: 5,000 − 4,000 = 1,000 ✓

  Total Tax Liability: 36,000 + 1,000 = 37,000 ✓

  All transactions DR = CR:
    Total Debits:  603,000
    Total Credits: 603,000
    DR = CR ✓

End of Tax Summary Guide