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Old 09-28-2017, 07:34 AM
jason_k jason_k is offline
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Credit Memo for Wrong Tax Code on Invoice

Hello, I have a situation where my vendor billed the wrong tax code on the invoice. They later sent me a Credit Memo for -$100 for wrong tax code.

How can I record this? Which account do I record this to? I don't believe I can record it to COGS since the vendor credited us the difference in taxes and not the cost of goods sold?

What is the best way to record this? Thanks in advance.
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Old 10-11-2017, 10:45 PM
Lorin Browning Lorin Browning is offline
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I am assuming that you do not normally pay sales tax on items purchased for resale.

To your specific question: You record the sales tax refund to whatever account(s) you posted the original invoice.

Example: Suppose you purchased an item for $476.19 with a sales tax charged amount of $23.81. To what account(s) was that transaction posted? In other words, how did you account for the $500 spent on that transaction? The account that would have the reversing entry would be whatever account the $23.81 was posted.

If the entry of $500 was posted as the cost of the item sold, you would in fact reduce the cost of the item sold by $23.81 so the actual cost of the item would be $476.19.

It also appears that you are not posting to inventory purchased but are instead posting directly to cost of goods sold, but that is a different problem.
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Last edited by Lorin Browning; 10-12-2017 at 03:36 PM.
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