This movie explains what the sales tax payable on a trial balance report represents compared to the sales tax payable in QuickBooks after recording open invoices. It describes how to record a sales tax adjustment to reflect collected sales tax on paid invoices, including the account to use as the adjustment account and how to calculate the adjustment amount.
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- [Voiceover] When you record open invoices QuickBooks adds the uncollected sales tax from those invoices to your sales tax payable account. But the account balance on your trial balance report represents the total of uncollected and collected sales tax. A sales tax adjustment is how you tell QuickBooks about that collected sales tax. Let's look at the trial balance report. The opening balance as of the start date for sales tax payable is $200.
But if we go to QuickBooks and look at the chart of accounts, I'm gonna press Control + A to open that up. And we're gonna scroll up to find our sales tax payable account. The balance in QuickBooks is only $38.25. Well, that's the sales tax that came from the open invoices we've recorded. It represents the uncollected sales tax from open invoices. But we have to tell QuickBooks about the sales tax that's already been collected on paid invoices.
The solution, a sales tax adjustment. We're gonna head to the vendors menu, point at sales tax, and then choose adjust sales tax due. That opens up the sales tax adjustment dialog box. The first thing we're gonna do is change the adjustment date to our start date. Remember, that's March 31st. So I'm gonna click the calendar icon and choose my start date. The entry number box is already filled in and boy, that entry looks really familiar.
If you think back to the journal entry that we created I changed the entry number. I used my initials, B-J-B, a hyphen, then I added the year, and used 01. So now we've got an entry number that ends in 02. If you think about it you might figure out that what QuickBooks is doing behind the scenes is creating a journal entry. So it's filling in the next entry number in the journal entry number sequence.
And we're gonna leave it just the way it is. Now let's move onto the sales tax vendor box. I'm gonna click the down arrow and choose my vendor for the city sales tax agency. That's the only one I have. However, if you send taxes to more than one sales tax agency, and chances are you do, you have to create a separate adjustment for each sales tax agency with the amount of the collected tax for that agency.
Now we're gonna choose the adjustment account. Of course, it's gotta go somewhere. The account that we're gonna use is opening balance equity. Remember, all the adjustments we make are going to the same account, opening balance equity. That way we can deal with it all at once at the very end. Finally we define the actual adjustment. The increase sales tax by option is selected and that's what we want.
Because we have to add the collected tax to the balance. The amount is the total from sales tax payable on our trial balance report minus the uncollected sales tax. So the total on the trial balance report is $200, the amount in the chart of accounts in QuickBooks is $38.25. If you do the math you'll figure out that the amount has to be $161.75.
Well, let's click OK and find out. When I do that the balance changes to $200, which matches the amount on my trial balance report. That's how you use a sales tax adjustment to match the QuickBooks sales tax payable balance with your trial balance.
- Converting existing data into a QuickBooks format
- Creating a company file from scratch
- Adding accounts and subaccounts
- Setting up customers, vendors, products, and services
- Opening balance information
- Recording account opening balances
- Recording open transactions
- Adjusting sales tax balance and inventory quantity
- Setting up closing data
- Adding users