Tracking your payable deduction

Tracking your payable deduction


Introduction:

Payable Deductions are often setup 2 different ways; the first is setup to track and clear out your Commission Payable GL account, no taxes are applicable to this fee and you're not wanting to track this fee in your own GL account.  The second is to track taxes and/or outside sources eg., GST/HST/State Taxes, Non-licensed referrals, Garnishments, etc. In this article we'll outline option 2 in more detail, for full Payable deduction setup, visit this article.


Option one: Non-taxable fee and/or not tracking in a GL.



Option two: Taxable fee and/or tracking in a separate GL

To make sure the tax on sales and the input tax credits posts correctly while reducing the balance in the liability account you’ll need to set up two posting types. 

One payable and one standard as they function a little differently and allow you to properly record sales taxes as well as clear the commission liability balance to $0.00.  For the amount of a referral or other payable when the funds are posted into the account Loft sets up a credit balance in the liability account. To see how this fee flows through on the Accounting side, see below:

Accounting Flow-through

In this example we’re just looking at $100 or $105 including sales tax. 

For example the payable posts; 

Debit Commission Liability Account     $100.00

Debit tax on purchases                            $5.00

Credit Accounts Payable                    ($105.00)


We actually need to clear the liability for the full $105 so going forward you will see the payable as above and another posting that will post the following entries;

Debit Commissions Liability Account   $105.00 

Credit Commission liability Account    ($100.00)

Credit tax on sales                                  ($5.00)


The sales tax is a pass through as the Brokerage both has to recognize it as coming in through your billing (tax on sales) and then paying it out to the vendor (tax on purchases). 


The original credit of ($105.00) in the Commission Liability Account is set up through the deposit, then the payout posts the following;

Debit  $100.00 + tax

Debit  $105.00

Credit $100.00 + tax

Clearing out the liability account leaving a balance of $0.00.