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How do I track meals and entertainment expenses?

The steps below explain how to track Meals and Entertainment expenses.

Step 1 - Create a Tax Vendor

The following steps show how to create a vendor to track the portion of GST that can't be claimed as an input tax credit on your GST return. 

  1. In the Vendor menu, go to the Vendor Centre and click New Vendor.
  2. In the Vendor Name field, assign a name such as "Receiver General Non-Taxable".
  3. Go to the Sales Tax Settings tab and check Vendor is a Sales Tax Agency
  4. Leave the Tax Return field blank.
  5. Check Track tax on purchases separately to, and select an expense account to track tax on purchases (for example "GST Expense"). 
    Note: The expense account you use to track tax on purchases should be a sub-account of your Meals and Entertainment expense account. For information on creating sub-accounts, search the in-product Help for "accounts (managing), subaccounts".
  6. Click OK.

Proceed to Step 2, where you will assign this vendor to the ineligible GST sales tax item and create an eligible sales tax item.

Step 2 - Create two Sales Tax Items

For the vendor created in Step 1, create two sales tax items that make up the 5% GST Tax Rate. Create one item called "GST Eligible 2.5%", which is the portion of the GST that is claimable on the GST Return. Create another sales tax item called "GST Ineligible 2.5%", which is the portion of the GST that is not claimable on the GST Return.  

Create the GST Eligible sales tax item:

  1. Click on the Lists menu and click Item List.
  2. Click the Item button and select New.
  3. From the Type drop-down arrow, select Sales Tax Item.
  4. In the Sales Tax Name field, enter "GST Eligible 2.5%".
  5. In the Tax Rate field, enter "2.5%".
  6. From the Tax Agency drop-down, select Receiver General.
  7. From the Sales Tax Return Line, select Line 106 Input tax credits (ITCs).
  8. Click OK.
Create the GST Ineligible sales tax item:
  1. Click on the Lists menu and click Item List.
  2. Click the Item button and select New.
  3. From the Type drop-down arrow, select Sales Tax Item.
  4. In the Sales Tax Name field, enter "GST Ineligible 2.5%".
  5. In the Tax Rate field, enter "2.5%".
  6. From the Tax Agency drop-down, select Receiver General Non-Taxable. 
    Note: Creating the vendor "Receiver General Non-Taxable" is step 1 above. 
  7. From the Sales Tax Return Line, select Tax Paid On Purchases.
  8. Click OK.
Proceed to Step 3 and use these items to create a sales tax group.
Step 3 - Create a Sales Tax Group

Create a sales tax group that includes the two sales tax items you just created in Step 2. . This makes up the 5% GST Rate. Proceed to Step 4 and assign this group to your sales tax code.

  1. Click on the Lists menu and click Item List.
  2. Click the Item button and click New.
  3. From the Type drop-down arrow, select Sales Tax Group.
  4. In the Group Name/Number field, enter an easily identifiable name, such as "Meals & Entertainment".
  5. Enter a Description, if desired.
  6. Click the first line in the Tax Item drop-down arrow and select "GST Eligible 2.5%". Click the second line in the Tax Item drop-down arrow and select "GST Ineligible 2.5%". NOTE: These are the Sales Tax Items you created in Step above. 
  7. If you pay PST on meals and entertainment, you should also add the PST sales tax item to this group (for example, "PST on purchases").
  8. Click OK.
Proceed to Step 4 and assign this group to your sales tax code.
Step 4 - Create Sales Tax Code

Create a new sales tax code that tracks the sales tax group you just created.  Now, proceed to Step 5 and apply this code to your Meals & Entertainment Expense account.

  1. Click on the Lists menu and click Sales Tax Code List.
  2. Click the Sales Tax Code button and click New.
  3. In the Sales Tax Code field, enter a code that is three characters in length. For example, "M&A"
  4. Select Taxable.
  5. From the Tax Item for Purchase drop-down menu, select the sales tax group you created in Step 3 above. 
  6. Click OK.
Now, proceed to Step 5 and apply this code to your Meals & Entertainment Expense account.
Step 5 - Assign the Sales Tax Code to your Meals & Entertainment Expense account

Assign the sales tax code to your Meal & Entertainment Expense account, so the code automatically applies to all transactions related to meals and expenses. If you do not have a Meals & Entertainment Expense account, create one. Search the in-product Help for "accounts, adding".

GST should not be calculated on tips. An input tax credit cannot be claimed on tips that did not include GST.
 
 

 

 
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