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hdna's avatar
hdna
User
2 years ago
Solved

Temporary Holding Account

Hi,

 

I set up a temporary holding account to use when paying refunds electronically when following the MYOB instructions.  When I do the refund, there is a balance left in the account which equals the GST amount.  I changed the code to N-T but it is still happening.

 

The credit amount includes the GST but the debit amount is GST free.  Our accountant did a journal entry to clear the account but I wanted to know the correct set up so this doesn't keep happening.

 

I am not a bookkeeper or accountant so am a bit unsure what I should do.  Any help appreciated.

  • Tracey_H's avatar
    Tracey_H
    2 years ago

    Hi hdna 

     

    The name of the account is personal preference, my personal rule when creating a new account was to name it something easily identifiable when looking at reports. 

     

    We're not permitted to advise which tax code you should use for transactions, that's something you should check with your accountant.

     

    But if you look at the transactions recorded in that process:

     

    1. Income and GST collected account are credited when you record the original invoice
    2. Income and GST collected account are debited when you record the return (negative) invoice

    Effectively clearing the income and GST amounts as the sale no longer exists.

     

     A Receive payments transactions credits the Trade debtors account and debits the bank account the full payment amount. No GST is recorded in a payment transaction as it's been accounted for in the sale invoice.

     

    A Refund transaction debits the Trade debtors account and credits the bank account the full refund amount. No GST is recorded in the refund transaction as it's been accounted for in the return invoice.

     

    The only difference in paying the refund electronically and the above process is that you're posting the refund to a holding account instead of the bank account so that you can process an electronic payment transaction.

     

    I hope that helps.

     

    Please let me know if you need further help.

     

    If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

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  • Tracey_H's avatar
    Tracey_H
    Former Staff
    2 years ago

    Hi hdna 

     

    Thanks for your post. I'll be happy to go through the process for you:

     

    1. create the customer credit:

     

     

    2. go to Sales register>>Returns & Credit tab>>Pay refund>>in the Account field select the temporary account you created:

     

     

     

    3. record the Spend money transaction:

     

     

    4. process the electronic payment transaction

     

    The Pay refund transaction credits the temporary account the Total amount of the credit and debits the Trade debtors account:

     

     

    The Spend money transaction credits the electronic clearing account and debits the temporary account the Total amount of the refund:

     

     

    Please let me know if you need further help.

     

    If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

    • hdna's avatar
      hdna
      User
      2 years ago

      Hi Tracey,

       

      Thanks for your reply.  I followed the MYOB instructions and created a temporary holding account, not an electronic refunds account but I could change the name of the account.  Should the tax code be N-T for the electronic refunds account?  

       

      I have followed the same process you listed below but just with a different refund account name.

       

      When I look at the debits and credits in the temporary holding account, the debits don't include the GST but the credit side does.  This ends up leaving me with the GST amount in the temporary holding account.  My accountant then creates a journal entry to clear the amount out of the account.

       

      Are you able to advise anything further?

       

      Thanks

      • Tracey_H's avatar
        Tracey_H
        Former Staff
        2 years ago

        Hi hdna 

         

        The name of the account is personal preference, my personal rule when creating a new account was to name it something easily identifiable when looking at reports. 

         

        We're not permitted to advise which tax code you should use for transactions, that's something you should check with your accountant.

         

        But if you look at the transactions recorded in that process:

         

        1. Income and GST collected account are credited when you record the original invoice
        2. Income and GST collected account are debited when you record the return (negative) invoice

        Effectively clearing the income and GST amounts as the sale no longer exists.

         

         A Receive payments transactions credits the Trade debtors account and debits the bank account the full payment amount. No GST is recorded in a payment transaction as it's been accounted for in the sale invoice.

         

        A Refund transaction debits the Trade debtors account and credits the bank account the full refund amount. No GST is recorded in the refund transaction as it's been accounted for in the return invoice.

         

        The only difference in paying the refund electronically and the above process is that you're posting the refund to a holding account instead of the bank account so that you can process an electronic payment transaction.

         

        I hope that helps.

         

        Please let me know if you need further help.

         

        If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.