Many businesses have amounts deducted from gross receipts. For example, if you receive Diners Club or American Express the service charge fees are deducted and only the net receipt is shown on the bank statement. Other people have fuel or materials etc. deducted from the gross receipt and only receive the net balance. Farmers have expenses deducted from gross receipts when paid by Stock Agents, Milk Factories etc.
To account for this:
1. Establish a ‘Non-GST’ type column called ‘Deductions’ in the Receipts section.
When you record the receipt, record the actual amount received in the Total Receipt column, the gross amount of the receipt in the analysis column(s), e.g. Sales, and then record the amount of the deduction as a negative in the ‘Deductions’ column.
For example, if the total sale was $100 and service charge fees of $5 were deducted, you would record $95.00 in Total Receipts, $100.00 in Sales and -$5.00 in ‘Deductions’.
2. In the Payments section, add a ‘Non-GST’ type column called “Deductions from Gross Receipts’ and columns of the appropriate GST type for the Expenses making up the amount deducted from receipts.
In Total Bank (or Cash) Payments, record the amount as $0.00. Allocate the amount to the appropriate payment analysis column, and then record the negative balance in the ‘Deductions from Gross Receipts’ column.
In our example, we would record $0.00 in Total Cash Payments. (If we record it in Total Bank Payments we would have to click it off in our reconciliation). We would then record $5.00 in Service Charge Fees, and -$5.00 in ‘Deductions from Gross Receipts’.
By doing this, the amount in the ‘Deductions’ column in Receipts offsets (contras out) the amount in the “Deductions in Gross Receipts’ column in the Payments section. Total Sales are accurately recorded and the expense (acquisition) is correctly allocated in the Payments. Your GST Report as well as your normal accounting reports will report both receipts and payments correctly.