Admas University

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Accounting and Finance Level

III
Learning guide
Unit of Competence: Calculate and Administer Taxes,
Fees and Charges
Module Title: Calculating and Administering Taxes,
Fees and Charges
TTLM Code : LSA ACF3 M10 1221
LO1: Assess goods and documents for duty and tax
liability
LO2. Calculate taxes, fees and charges
LO3: Complete transaction records
LO4: Deal with enquiries and complaints

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Occupational Standard: Accounting and Finance Level III
Unit Title Calculate and Administer Taxes, Fees and Charges
Unit Code LSA ACF3 10 1221
Unit Descriptor
This unit covers the skills and knowledge required to determine liability
to pay taxes, fees and charges , calculate amounts and administer taxes.
It includes assessing goods and documents for liability; calculating
taxes, fees and charges; and completing transaction records.
In practice, calculating taxes, fees and charges may overlap with other
generalist or specialist public sector workplace activities such as acting
ethically, complying with legislation, working effectively, using
resources and financial systems, organising workplace information, etc.

Elements Performance Criteria

1. Assess goods and 1.1 Goods and documents are examined in accordance with
documents for legislation, organizational guidelines and procedures.
duty and tax
liability 1.2 Class of taxes, fees or charges is determined in accordance with
legislation and guidelines.
1.3 The value of the goods/services is determined.
1.4 Liability to pay taxes, fees and charges is determined in
accordance with legislation, policies and guidelines.
1.5 The rate of taxes, fees and charges is determined in accordance
with organizational policy and procedures.
2. Calculate taxes, 2.1 Taxes, fees and charges are calculated in accordance with relevant
fees and charges legislation, policies and guidelines.
2.2 Relevant systems are used to assess amounts payable.
2.3 All calculations are made accurately and checked for consistency.
3. Complete 3.1 Records of transaction are completed clearly and accurately in
transaction accordance with organizational guidelines, and identify all relevant
records information.
3.2 Transaction records are issued in accordance with organizational
guidelines and standard operating procedures.
3.3 Copies of transaction records are retained and stored in accordance
with legislation, policies, guidelines and procedures.
4. Deal with 4.1 Enquiries are dealt with in accordance with organizational
enquiries and procedures.
complaints 4.2 Payment options, due dates and record-keeping requirements are
explained, tailoring communication to suit diverse customer needs.
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 4.3 Complaints are dealt with and decisions recorded and notified in
accordance with legislation, regulations and organizational
procedures.
4.4 If customers are dissatisfied with a decision, their rights to have
decision reviewed are explained in accordance with organisational
procedures.

Variable Range
Goods: May include but not limited to :
 air and sea cargo
 hand-held cabin baggage
 passenger and crew baggage
 'per favour' items
 postal items
 unaccompanied baggage
 bulk and Containerized products
Legislation, May include but not limited to :
organizational  enabling and allied legislation and regulations, such as:
guidelines and  Customs duty law
procedures  Customs Tariff
 Excise Tax law
 Quarantine law
 Imported Items Control regulations
 Export Control regulations
 organizational policies and procedures
 work area standard operating procedures/work instructions
 procedures manuals
 occupational health and safety and environment legislation and
guidelines
Taxes, fees and May include but not limited to :
charges  tariffs
 duty
 penalties
 infringement notices
 taxes, such as:
 Goods and Services Tax
 Luxury goods Tax
 fees for service, such as:
 treatment and return to sender charges
 document charges
 fees associated with import directions
 inspection charges
Value of the goods May include but not limited to :
 value of the taxable import
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  customs value
 prescribed weight
Liability to pay  possible tax exemptions
includes  possible customs exemptions
consideration of:  who has liability (i.e. owner or packer)
Rate may take  charging guidelines
account of:  legislated penalty units
 origin of the goods
 applicable concessions
 correct tariff classification
Relevant systems or May include but not limited to :
packages  specific 'ready re ckoners'
 revenue systems
 Duty calc
 COMPILE
 AIMS /Accounting Information Management System/
 EXDOC /Export Documentation System/
Records of May include but not limited to :
transactions  informal clearance documents
 customs entry
 invoice
 demand for payment
 record of credit payment
 other forms of receipt
Rulings: May include but not limited to :
 revenue rulings
 tax rulings
 public rulings
 circulars
 Commissioner's determinations

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LO1: Assess goods and documents for duty and tax liability

Taxes and Fees for New Car Purchases

Purchasing a new vehicle, whether it's new or used, is a huge investment. You must, before
buying, be aware of all extra costs including insurance, maintenance, registration, titling, and
new car fees and taxes. Otherwise, you risk receiving surprise bills, causing your carefully
calculated car-budget to be compromised.
Generally, purchasing or leasing a new car in any state will require:
 Buying car insurance.
 Transferring the title.
 Paying registration fees.
 Paying for a vehicle inspection/smog check/emissions test. AND
 Sales taxes.
 Title Transfers
 Car Registration
 Smog Check and Vehicle Inspections
Additional, you can visit car insurance center to shop around your locality and compare policy
quotes to find a car insurance policy that's right for you.
It's important to factor in all the costs that come with a vehicle purchase or lease, regardless
or whether the car is new or used.
Sales Taxes When Buying a Vehicle
Surprising costs bear especially true with the often overlooked auto sales tax. Since it varies
from state to state, new and used car sales tax is difficult to pinpoint and follow.
The sales tax rate may vary between new and used car purchases, however, along with the state
tax; you may also be responsible for:
 County taxes.
 City taxes.
 School district taxes.

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Certain states may also assess an annual property tax on your vehicle, which you'll need to pay
before you can renew your registration.
If you are unsure about the taxes you'll be responsible for when buying a new car, you can visit
our tax and tag fee calculator & chart links page (see below) or contact your state's motor vehicle
office.

Vehicle Sales Tax and Fee Calculator

Online sales tax and fee calculators will give you an estimate of what you'll pay when buying
a new car. Keep in mind calculation factors vary by state. It's best to use a sales tax calculator
specific to where you'll be purchasing the vehicle to ensure you budget properly.
For many tax and tag calculators, you should be prepared to enter:
 The vehicle's year, make, and model OR its vehicle identification number (VIN).
 The purchase price of the vehicle.
 The odometer/mileage reading on the vehicle when you bought it.
 The date you purchased the vehicle.
 The date the vehicle was or will be operated in the state.

Understanding Duties and Taxes

It is important to consider the effects of duties, taxes, port handling fees and other customs
charges when determining your shipment's total shipping charges. Depending on the content of
your shipment and the destination country, customs charges will affect the price the recipient is
willing to pay for your product. Being able to calculate and communicate the "landed" cost
upfront can often save both you and the recipient valuable time and money.

Almost all shipments crossing international borders are subject to the assessment of duties and
taxes imposed by the importing country's government. Duties and taxes are imposed to generate
revenue, protect local industries against foreign competition or both. The duties and taxes
normally must be paid before the goods are released from customs. A shipment's duty and tax
amount may be based on:
 Product value
 Trade agreements
 Country of manufacture

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  Use of the product
 The product's Harmonized System (HS) code
Customs officials assess duties and taxes based on information provided on the air waybill, the
Commercial Invoice and other relevant documents.
Please note: As per the contract of carriage with FedEx®, the shipper is ultimately liable for any
duties and taxes assessed on the shipment. If the recipient refuses the package or the recipient or
third party FedEx account holder refuses to pay for duties and taxes, the original shipper will be
billed for duties and taxes.
Commodity Descriptions and Duties and Taxes
Provide an accurate description of your shipment contents
Duties and taxes, and other customs fees may be assessed based on the contents of your
shipment. Accurate descriptions of shipment contents are not only required for this purpose, but
are essential for timely customs clearance. A consistent and detailed description of your
shipment contents on all documents will help reduce customs delays.
Tariff tables are based primarily on three factors, so ensure that all three are clearly addressed
in your commodity description:
 What is it?
 What is it made from?
 What is the intended use?
Be specific. "Metal parts for hydraulic valves" is better than "machine tools." Also, use generic
names, in addition to trade names.

Value-added Tax (VAT) or Goods and Services Tax (GST)

A VAT is a general consumption tax assessed on the value added to goods and services. In
some countries, including Singapore, Australia, New Zealand and Canada, this tax is known as
goods and services tax or GST. Because this is a tax on consumer expenditure, businesses that
are VAT-registered and fully taxable do not bear the final costs of VAT. Every member state of
the European Union (EU) has a VAT.
A VAT is typically assessed on the "duty paid value" of the goods (which equals the cost of the
goods, insurance and freight (CIF) plus duty).
Paying Duties and Taxes

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Advancement Fee:
In some circumstances FedEx is required to pay certain duties and taxes in advance on our
customers' behalf. For instance, FedEx may pay an advancement fee when countries require
that duties and taxes be paid prior to customs' release or prior to certain items clearing customs.
In these circumstances FedEx will assess an Advancement Fee surcharge that will be billed to
the party designated to pay duties and taxes.
Responsible Party:
Duties and taxes on international shipments will be billed automatically to the recipient, unless
the shipper requests that FedEx bill the shipper or a third party. When completing the FedEx
International air waybill or FedEx Expanded Service International air waybill, you can select
the shipper, the recipient or a third party as the party responsible for payment.
Non-FedEx Account Holders:
Prepayment of duties and taxes before release to the recipient may be required if the
recipient does not have a valid FedEx account number or a FedEx account in good credit or
standing. Shipments will be held at the destination station until payment arrangements are
made or the FedEx Credit department has authorized release of the shipment.

Managing Transactions
This chapter provides information on administration tasks used to manage transactions. These
tasks include monitoring transactions, handling heuristic completions, how to abandon a
transaction, resolving in-flight transactions, and transaction recovery.
Monitoring Transactions
 Handling Heuristic Completions
 Moving a Server
 Abandoning Transactions
 Manually Resolving Current (In flight) Transactions
 Transaction Recovery after a Server Fails
Monitor transactions on a server using statistics and monitoring facilities. Use the Administration
Console to configure these features and to display the resulting output.

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Monitoring Transactions
In the Administration Console, monitor transactions for each server in the domain. Transaction
statistics are displayed for a specific server, not the entire domain.
A heuristic completion (or heuristic decision) occurs when a resource makes a unilateral decision
during the completion stage of a distributed transaction to commit or rollback updates. This can
leave distributed data in an indeterminate state. Network failures or resource timeouts are
possible causes for heuristic completion. In the event of an heuristic completion, one of the
following heuristic outcome exceptions may be thrown:
Heuristic Rollback—one resource participating in a transaction decided to autonomously
rollback its work, even though it agreed to prepare itself and wait for a commit decision. If
the Transaction Manager decided to commit the transaction, the resource's heuristic rollback
decision was incorrect, and might lead to an inconsistent outcome since other branches of the
transaction were committed.
Heuristic Commit—one resource participating in a transaction decided to autonomously
commit its work, even though it agreed to prepare itself and wait for a commit decision. If
the Transaction Manager decided to rollback the transaction, the resource's heuristic commit
decision was incorrect, and might lead to an inconsistent outcome since other branches of the
transaction were rolled back.
Heuristic Mixed—the Transaction Manager is aware that a transaction resulted in a mixed
outcome, where some participating resources committed and some rolled back. The underlying
cause was most likely heuristic rollback or heuristic commit decisions made by one or more of
the participating resources.
Heuristic Hazard—the Transaction Manager is aware that a transaction might have resulted in
a mixed outcome, where some participating resources committed and some rolled back. But
system or resource failures make it impossible to know for sure whether a Heuristic Mixed
outcome definitely occurred. The underlying cause was most likely heuristic rollback or
heuristic commit decisions made by one or more of the participating resources.
When a heuristic completion occurs, a message is written to the server log. Refer to
your database vendor documentation for instructions on resolving heuristic completions.
Some resource managers save context information for heuristic completions. This information
can be helpful in resolving resource manager data inconsistencies. If the Forget Heuristics

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attribute is selected (set to true) on the JTA panel of the Web Logic Console, this information is
removed after a heuristic completion. When using a resource manager that saves context
information, you may want to set the Forget Heuristics attribute to false.
Moving a Server
A server instance is identified by its URL (IP address or DNS name plus the listening port
number). Changing the URL by moving the server to a new machine or changing the Listening
Port of a server on the same machine effectively moves the server so the server identity may
no longer match the information stored in the transaction logs.
If the new server has the same URL as the old server, the Transaction Recovery Service
searches all transaction log files for incomplete transactions and completes them as described in
Transaction Recovery Service Actions after a Crash.
When the coordinator server is in the same domain as the sub-coordinator and the server URL
changes, the coordinator queries the Administration Server for the new URL of the sub-
coordinator and the propagation of any new transactions and any transactions that are
committing or rolling back use the new URL. Transaction branches for the sub-coordinator with
pending commit records stored in the coordinator's transaction log files before the URL change
are unrecoverable. If you wish, you can delete the transaction log files of the coordinator. This
step prevents the Transaction Recovery Service from attempting to resolve these transactions
until the value of the A band on Time out Seconds parameter is exceeded. See Abandoning
Transactions and How to Remove Transaction Records for more information.
When transactions span multiple domains and if a server acting as a remote transaction sub-
coordination fails and its URL changes, any ongoing transactions do not complete (commit or
are rolled back) because the coordinator is unable to communicate with the remote domain's
Admin server, The coordinator is unable to contact the sub-coordinator using the new URL and
any ongoing transactions fail. The coordinator attempts the commit or rollback request until the
A band on Time out Seconds value is exceeded. See Abandoning Transactions for more
information. Any new transactions fail because the coordinator cannot contact the sub-
coordinator. The TLOGs of the coordinator and sub-coordinators, excluding the moved server
domain, must be deleted. See How to Remove Transaction Records.
Oracle recommends configuring server instances using DNS names rather than IP addresses
to promote portability.

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If you move a server to a new machine, follow the instructions for Recovering Transactions
For a Failed Non-Clustered Server.
Abandoning Transactions
You can choose to abandon incomplete transactions after a specified amount of time. In the two-
phase commit process for distributed transactions, the transaction manager coordinates all
resource managers involved in a transaction. After all resource managers vote to commit or
rollback, the transaction manager notifies the resource managers to act—to either commit or
rollback changes. During this second phase of the two-phase commit process, the transaction
manager continues to try to complete the transaction until all resource managers indicate that the
transaction is completed. Using the A band on Time out Seconds attribute, set the maximum
time, in seconds, that a transaction manager persists in attempting to complete a transaction
during the second phase of the commit protocol. The default value is 86400 seconds, or 24 hours.
After the abandon transaction timer expires, no further attempt is made to resolve the transaction
with any resources that are unavailable or unable to acknowledge the transaction outcome. If the
transaction is in a prepared state before being abandoned, the transaction manager rolls back the
transaction to release any locks held on behalf of the abandoned transaction and writes an
heuristic error to the server log.
Tuning Transaction Processing
The first phase of the two-phase commit protocol is called the prepare phase. The required
updates are recorded in a transaction log file, and the resource must indicate, through a resource
manager, that it is ready to make the changes. Resources either vote to commit the updates or to
roll back to the previous state. The second or commit phase is what happens after the resources
vote. If all resources vote to commit, all the resources participating in the transaction are
updated. If one or more of the resources vote to roll back, then all the resources participating in
the transaction are rolled back to their previous state. Web Logic Server provides the following
parameters that you can use to tune the amount of time spent processing a transaction.
The maximum amount of time that can be spent processing from the beginning of a
transaction until the end of the first phase of a transaction is controlled by setting the value of
the transaction-timeout attribute.
The maximum amount of time that can be spent processing the second phase of a transaction is
controlled by setting the value of the completion-timeout-seconds attribute.

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the maximum amount of time spent processing the second phase was approximately twice the
default transaction-timeout value with a maximum value of 120 seconds and not tunable. For the
vast majority of environments, the time allotted for completion of the second phase is adequate.
However, in environments where high system stress or high network latency can occur, it is
possible to exceed the maximum amount of time available to complete the commit phase and the
transaction manager throws a System Exception. A System Exception is non-deterministic
relative to transaction outcome so an application environment must provide special exception
handling for this case which often involves manually analyzing the transaction activity and state
of the resources involved in the transaction. As application stacks become more complex, it
becomes more difficult to resolve transaction outcomes. The completion-timeout-seconds
attribute provides the possibility for a successful or deterministic completion in many cases by
allowing a longer processing time for the commit phase.
If the completion-timeout-seconds value exceeds the value set for abandon-timeout-seconds, the
abandon-timeout-seconds overrides completion-timeout-seconds value. If the transaction is
abandoned, a System Exception is thrown. In general, transactions requiring a large values for
the transaction-completion-seconds attribute indicate a need for system tuning.
Note: Please note that if the abandon-timeout-seconds value is set less than 60 seconds, it is
voided by the default completion-timeout-seconds setting. Also, within the first 600 seconds (ten
minutes) after the transaction service's startup, the abandon-timeout-seconds setting becomes
fully void.
Note: The completion-timeout-seconds attribute does not apply to imported transactions such as
JCA transactions or to recovering transactions.
Manually Resolving Current (In flight) Transactions
In some cases, a transaction may not complete normally due to system or network failures. In
such situations there may be locks held on behalf of the pending transaction that are inhibiting
the progress of other transactions. After the Abandon Timeout period has elapsed, the Web Logic
Server Transaction Manager removes the transaction from its internal data structures and writes a
heuristic error to the server log. You can also manually resolve "stuck" transactions.

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How should I record my business transactions?
A good recordkeeping system includes a summary of your business transactions. Business
transactions are ordinarily summarized in books called journals and ledgers. You can buy them
at your local stationery or office supply store.
A journal is a book where you record each business transaction shown on your supporting
documents. You may have to keep separate journals for transactions that occur frequently.
A ledger is a book that contains the totals from all of your journals. It is organized into different
accounts.
Electronic Records: All requirements that apply to hard copy books and records also apply to
business records which are maintained using electronic accounting software, point of sale
software, financial software or any other electronic records system. The electronic system must
provide a complete and accurate record of your data that is accessible to the IRS.
Whether you keep paper or electronic journals and ledgers and how you keep them depends on
the type of business you are in. For example, a recordkeeping system for a small business might
include the following items:
 Business checkbook
 Daily and monthly summary of cash receipts
 Check disbursements journal
 Depreciation worksheet
 Employee compensation records
Note: The system you use to record business transactions will be more effective if you follow
good recordkeeping practices. For example, record expenses when they occur, and identify the
sources of income. Generally, it is best to record transactions on a daily basis.

Business and Keeping Records

Keeping accurate, complete
records
Starting a business is exciting. You're doing what you love and what you're good at.
It's important you keep accurate and complete records. Your business records should include:
 banking information
 proof of income
 expenses

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  cash books, and
 Wage books.
You need to be organized, keep your records up-to-date and then hold on to them for seven tax
years.
Good records are important for your business because they:
make filling in your tax returns easier and quicker make it quicker for your tax agent or
accountant to do your books and will save you money give you the information you need to
manage your business and help it grow, and make it easier to get a loan.
Tax records are a legal requirement of running a
business. What tax records are
A tax record includes any information or document about:
 sales
 income
 expenses
 assets, and
 liabilities
You can use your records to fill in tax returns and finalize your tax.
Records can be paper-based or you can use a bookkeeping software package. We'll accept paper
records, electronic records or a combination of both.
How long records are kept for
Records must be kept for seven tax years.
It's a good idea to keep your paper records off the ground and in a dry place so they stay in good
condition.
Electronic records should be backed up, eg on a USB stick, and kept in a secure place. If
you change to new software check that you can still read your old records using the new
system. Storing records in electronic form
You are able to store your business records electronically, so long as in doing so you meet
the requirements of the Electronic Transactions Act 2002.
The Act requires that the:
 Integrity of the information will be maintained, and information will be readily
accessible so as to be useable for subsequent reference. We may allow a:

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  Taxpayer to store records offshore or third party to hold records offshore for multiple
taxpayers.
When we consider requests to store records offshore, we'll ensure that this won't hinder our
compliance activities. This means the records stored offshore must be able to be referred to New
Zealand without delay and at no cost to us.
Read our Standard Practice Statement 13/01 for guidelines on the retention of business records in
electronic format and how we consider an application to store business records offshore
Read a list of third party providers who have our approval to store taxpayer electronic records
offshore
Government Tax - These are refundable government levied air travel taxes which are payable in
certain countries
Passenger Service Charge/Airport tax - This is a charge made by the airport authority to an
airline for the use of the terminal, runway, emergency services, security facilities etc. In some
cases this charge also includes the cost of passenger and ramp handling at the airport. This non
refundable charge is made on a per passenger basis and varies from airport to airport.

LO2. Calculate taxes, fees and charges

Fees & Charges

Taxes, Fees and charges are imposed on air transportation by government authorities. taxes and
fees are subject to change at the discretion of each country's government and may be adjusted
for inflation and/or currency fluctuation. You may also be required to pay taxes, fees and
charges not already collected.
Fares, taxes, fees and charges
1. General
Fares apply only for carriage from the airport at the point of origin to the airport at the point of
destination, unless otherwise stated.
Fares do not include ground transport service between airports and between airport and town
terminals.
2. Applicable fares

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Applicable fares are those published by Carrier or, if not so published, constructed in
accordance with Carrier's tariff regulations.
Except as otherwise provided applicable fare is the fare in effect on the date of payment of the
ticket for travel on the specific dates and itinerary shown on it, Should the passenger change his
itinerary or dates of travel, this may impact the fare to be paid. When the amount that has been
collected is not the applicable fare the difference shall be paid by the passenger, or, as the case
may be, refunded by the Carrier.
3. Routing
Unless otherwise provided in the Carrier's regulations, fares apply only to routings published in
connection therewith. If there is more than one routing at the same fare, he passenger, prior to
issue of the ticket, ay specify the routing of the specifies no routing, Carrier may determine the
routing.
4. Taxes, fees and charges
Applicable taxes, fees and charges imposed by governments or other authorities or by the
operator of the airport will be in addition to the otherwise applicable fares and shall be payable
by the passenger to the extent they are not already included in the fare.
The taxes, fees and charges imposed on air travel are constantly changing and can be imposed
after the date of ticket issuance.
If a new tax, fee or charge is imposed even after ticket issuance or there is an increase in a tax,
fee or charge shown on the ticket, passenger will have to pay it. Similarly, in the event any taxes,
fees or charges already paid at the time of ticket issuance are abolished or reduced such that they
no longer apply, or a lesser amount is due, passenger will be entitled to claim a refund.
5. Currency
To the extent the applicable law permits, fares, taxes fees and charges are payable in any
currency acceptable to Carrier. When payment is made in a currency other than the currency
in which the fare is published, such payment will be made at the rate of exchange established
for such purpose by the Carrier.
6. Payment of fares, taxes and charges
Carrier shall not be obliged to carry, and may refuse onward carriage of a passenger or
his baggage, if the applicable fare or any charges or taxes payable have not been paid.
Tax

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A fee charged ("levied") by a government on a product, income, or activity. If tax is levied
directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a
good or service, then it is called an indirect tax. The purpose of taxation is to finance
government expenditure. One of the most important uses of taxes is to finance public goods and
services, such as street lighting and street cleaning. Since public goods and services do not allow
a non- payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the
good or service, and so they need to be provided by the government or a quasi-government
agency, which tend to finance themselves largely through taxes
Fee
1. A fixed sum charged, as by an institution or by law, for a privilege: a license fee; tuition fees.
2. A charge for professional services: a surgeon's fee.
3. A tip; a gratuity.
4. Law See fee simple.
5. A. In feudal law, an estate in land granted by a lord to his vassal on condition of homage and
service.
1. Remuneration: In contracts based on cost reimbursement pricing, the 'fee' represents an
amount beyond the initial cost estimates, and reflects factors such as the risks involved. Fee
is usually subject to statutory limitations, and may be either fixed (as in a cost plus fixed fee
contract) or allowed to vary within a specified range (as in a cost plus incentive fee contract).
2. Land law: Estate capable of being transferred. See also fee simple absolute in possession and
fee tail.

Tax Service Fee

A legitimate closing cost used to ensure that mortgagors pay their property taxes. A tax service
fee is typically paid by the buyer at the time the home is purchased, the lender then passes this
sum on to a tax service agency. The role of a tax service agency is to look for delinquent
property taxes and alert the mortgage company to prevent tax liens from existing against their
mortgagors' homes. Since tax liens have priority over lender liens, banks wants to ensure that
they, not the state, become the owner of these properties.
'Tax Service Fee'
For borrowers with impound accounts, property taxes are collected monthly with mortgage
payments; in this case, the tax service agency's job is to provide the lender with your property tax

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bills so that they will be paid on time. For borrowers without impound accounts, the mortgage
company will often remit any unpaid property taxes on behalf of the homeowner and then bill
him or her for the sum, plus penalties and fees.

Deferred Charge
A prepaid expense that is treated as an asset on a balance sheet and is carried forward until it is
actually used. Deferred charges often stem from a business making a payment for a good or
service that it has not yet received, such as the prepaying of insurance premiums or rent. A
company may pay for a year of rent in advance, for example, to receive more favorable terms;
this advanced payment is recorded as a deferred charge on the balance sheet. Each month, the
company can then use a portion of the funds in its deferred charges account and recognize this
amount as an expense on any financial statements.
Also called prepaid expense
'Deferred Charge'
Recording deferred charges ensures that a company's accounting practices are operating within
the generally accepted accounting principles (GAAP) by matching revenues with expenses each
month. A company may capitalize the underwriting fees on a corporate bond issue as a deferred
charge, subsequently amortizing over the life of the bond issue. Deferred charges refer to
payments that the company has made prior to receiving the corresponding goods and/or services.
Deferred revenue, on the other hand, refers to money that the company has received as payments
before a product has been delivered.
A prime example of a deferred charge is rent. Consider the case where a company pays a
lump sum to its landlord to cover rent for six months. As each month approaches, the
company will use a portion of the funds from its deferred charges account and recognize this
portion as an expense on its financial statements. This process ensures that revenues for the
month are matched with the expenses incurred for that month.
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Deferred income tax charge
Excess of actual income tax amount over the amount of tax payable shown on an income
statement, which occurs due to temporary difference in the recognition of income and expense
items, this excess, is recognized as a non-current asset on the taxpayer's balance sheet, until its
amortization in the following accounting period.

Bank Fees
Many banks charge nominal fees for various services, such as requesting a deposit slip or counter
check or notarizing a document. Bank fees generally constitute a major portion of revenue for the
bank, particularly for regional and local branches.
'Bank Fees'
Bank fees are usually nondeductible, except for annual custodial fees charged by the bank for
IRA accounts. Even checks that are used for tax records are nondeductible, unless the checks are
written from a money market account with limited check-writing privileges, and violation of this
privilege results in forfeiture of the account's money market status.

Service Charge
A type of fee charged to cover services related to the primary product or service being
purchased. For example, a concert venue may charge a service fee in addition to the initial price
of a ticket in order to cover the cost of security or for allowing electronic purchases. Another
example would be a fee for using the ATM of a competing bank.
Service Charge'
Services fees go by a number of different names depending on the industry, including booking
fees (hotels), security fees (travel), maintenance fees (banking) and customer service fees. These
fees are often levied when human interaction between a consumer and the company is involved,
with services beyond the physical good itself considered extra.

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LO 3. Complete transaction records

Sales Tax Calculator and De-Calculator

This calculator requires the use of JavaScript enabled and capable browsers. There are two
scripts in this calculator. The first script calculates the sales tax of an item or group of items, then
displays the tax in raw and rounded forms and the total sales price, including tax. You
(obviously) may change the default values if you desire. Enter the total amount that you wish to
have calculated in order to determine tax on the sale. Enter the sales tax percentage. For instance,
in Palm Springs, California, the total sales tax percentage, including state, county and local taxes,
is 7 and 3/4 percent. That entry would be .0775 for the percentage. The second script is the
reverse of the first. If you know the total sales price, and the sales tax percentage, it will calculate
the base price before taxes and the amount of sales tax that was in the total price. This is
particularly useful if you sell merchandise on a "tax included" basis, and then must determine
how much tax was involved in order to pay your sales tax, this is the ideal tool. Several state tax
agencies actually suggest our calculator to merchants that could use it in that manner.
Exercises # 1:
You buy a car for 20,000 dollars and pay 5 % in tax. How much is tax?
Tax = 20,000 times 5% = 20,000 times 0.05
Tax = 20,000 times 0.05 = 1,000 dollars.
The cost with tax is 20,000 + 1000 = 21,000
Exercises # 2:
You buy a house for 400,000 dollars and pay a tax of 6 %. How much is tax?
Tax = 400,000 times 6 %
Tax = 400,000 times 0.06 = 24,000 dollars
The cost with tax is 400,000 + 24,000 = 424,000 dollars.
Exercises # 3:
The list price of a scientific calculator is 100 dollars. If you get a price discount of 15 % and pay
5 % for tax, what is the actual cost of your calculator?
First, find the price after the discount
Discount = 100 times 15 % = 100 times 0.15 = 15
Sale price = 100 - 15 = 85 dollars

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Tax paid = 85 times 5 % = 85 times 0.05 = 4.25
Actual cost = 85 + 4.25 = 89.25 dollars.
NB. You will get the same answer if you compute the tax paid first and then compute the
discount.

How to Calculate Sales Tax

It's important to know how much an item is going to cost before you purchase it. It's not as
easy as just looking at the price tag; sales tax must be calculated in order to determine the total
cost. Sales tax rates are increasing, which makes the tax impact on a purchase more significant.
Use these tips to learn how to calculate sales tax on your retail purchases.

Calculating Total Cost

1. Multiply the cost of an item or service by the sales tax in order to find out the
total cost. The equation looks like this: Item or service cost x sales tax (in decimal
form) = total sales tax. Add the total sales tax to the Item or service cost to get your
total cost.
o Make sure you put the sales tax into decimal form. You do this by taking the
percentage and sliding the decimal point two places to the left:
 7.5% sales tax becomes .075 in decimal form
 3.4% sales tax becomes .034 in decimal form
 5% sales tax becomes .05 in decimal form
Total cost =item cost + total sales tax
Calculating Fees for Recording Documents and Notices of Termination in the Copyright
office
Fee for Recording a Document or Notice of Termination
The proper fee for recording a document or notice of termination depends on the number of legal
transactions and titles contained in the document.
1 The basic recording fee is $ 105 if only one legal transaction and one title are involved.
2 If more than one legal transaction is contained in the document, then the fee is $ 105 for
each. 3 The $ 105 fee covers the first title contained in a document, but there is a charge of $ 35
for each set of 10 or fewer titles beyond the first title.

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 Fees for planning applications Calculating
fees for planning applications How is
planning application fees calculated?
The fee for each category of development broadly reflects the work a local planning authority
has to do to process the application. The local planning authority must decide the fee which will
apply to the application based on the category, or categories of development if the application is
for more than one type of development.
Is VAT charged on planning fees?
There is no VAT to pay on fees for planning applications as the service is considered to be a
‗non-business‘ activity.
What are the fees for outline applications?
Where an applicant has applied for an outline planning permission the fee is calculated based on
the site area of the application and the relevant fee category or categories for the type of
development proposed.
What are the fees for full applications?
Where an applicant has applied for full planning permission the fee is calculated by applying the
relevant fee category or categories to the proposals in the application. This can include for
example looking at the number of dwelling houses to be created, the area of gross floor space to
be created or the size of the site area.

What is the fee for each reserved matters application?

A reserved matters application may cover one or any number of reserved matters. The fee is
calculated with reference to the relevant fee category or categories for the type of development
proposed. The fee for each reserved matter(s) application is calculated as if it were a full
planning application. Where an application for approval of reserved matters relates to only one
part or phase of the development covered by the outline permission, fees should be charged on
the basis of the number of buildings or the floor space included in that part or phase. Subsequent
applications – in respect of other parts or phases – will attract fees on the same basis.

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Is there a limit to the number of reserved matters that can be submitted in one application?
There is no limit to the number of individual reserved matters that can be submitted as part of the
same application. In some cases an applicant may also need to make more than one attempt to
have a particular reserved matter approved.

How are site areas and floor spaces calculated?

For most planning applications the fees are calculated based on the site area or the floor space of
the application.
What should be defined as the site area?
Site area is defined as the area to which the application relates. This should be shown edged in
red on plans accompanying an application, while other land in the same ownership but not being
developed should be outlined in blue.
If a proposal is for carrying out alteration or works to the same type of existing structure in many
locations across a wide area, the local planning authority may accept plans where the area is
enclosed by a blue (or, if not owned by the applicant, other coloured) line, and each small works
site within that line is ringed or marked out in red. The area for the application would be the total
of all the pieces of land within red lines added together. This would be the case for applications
for non-domestic scale solar or wind farms.
How is floor space calculated?
Floor space is the gross amount (all storey‘s, including basements and garaging) to be created by
the development shown in the application. This is an external measurement, including the
thickness of any external and internal walls; the local planning authority decides which spaces
within a building count for fee assessment purposes.
Does site area or floor space get rounded up?
Any fraction of the stipulated unit of site area or floor space included in the application should be
corrected upward to the 0.1 of a hectare or square metre respectively. For example 2.36 hectares
would be rounded to 2.4 hectares and 60.4 square meters would be rounded to 61 square metres.
How do I calculate the fee for a solar or wind farm application?
The calculation for a solar panel or wind farm application is treated differently. The calculation
is based on the site area of the equipment only and any associated development such as ancillary
buildings or access. It does not include any land in between the equipment unless the applicant
wishes to have the flexibility to move the equipment within the site as a whole. Where the

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applicant wishes to have more flexibility on sitting equipment the fee would be based on the area
of land for the whole of the site.

Where the application is for a wind-turbine, the site area is based on the area of land within the
sweep of the blades where the turbine rotates 360 degrees. The area is calculated by calculating
the area of a circle where the radius is the length of the blade of the wind turbine. The area of all
the turbines is added together with any associated development. Please note that some elements
of the application may fall under different categories of development and therefore the areas for
each component would be calculated on the basis of mixed category development.

Income Tax Issues:

What is the difference between tax deductions and tax credits?
Tax deductions and tax credits can both reduce an individual‘s income tax liability, but they do
it in different ways. Tax deductions reduce taxable income; their value thus depends on the
taxpayer‘s marginal tax rate, which rises with income. Because deductions cannot reduce taxable
income below zero, their value is limited to the filer‘s tax liability before applying the deduction.
In contrast, tax credits directly reduce a person‘s tax liability and hence have the same value for
all taxpayers with tax liability at least equal to the credit. In addition, some credits are
refundable; they are not limited by the taxpayer‘s tax liability. As a general rule for policy, tax
deductions make most sense for items that represent reductions in ability to pay tax, such as
casualty losses. Credits are more appropriate for subsidies provided through the tax system.

 An individual tax filer has the choice of claiming the standard deduction or itemizing
deductible expenses for items such as state and local taxes paid, mortgage interest, and
charitable contributions. In either case, taxable income is decreased by the amount of the
allowed deduction. The deduction reduces tax liability by the amount of the deduction
times the filer‘s marginal tax rate and is thus worth more to taxpayers in higher tax
brackets. For example, a $10,000 deduction reduces taxes $1,500 for people in the 15
percent tax bracket, whereas the same deduction cuts taxes $3,500 for those in the 35
percent tax bracket.
 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of
2010 allow all taxpayers to claim the full value of their itemized deductions in 2011 and
2012.
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 However, if the relevant provision expires in 2013 as currently scheduled, high-income
taxpayers will have to reduce their itemized deductions and thus will not benefit fully
from their item izable expenses. The reduction in 2013 will be 3 percent of the amount
which adjusted gross income (AGI) exceeds $174,450 ($87,225 for married couples
filing separately), up to 80 percent of total itemized deductions.
 The standard deduction and some itemized deductions are disallowed under the
alternative minimum tax (AMT). For example, AMT taxpayers may not deduct state
and local tax payments or items in the "miscellaneous" deductions category. The AMT
reduces but does not eliminate other deductions. Medical expenses in excess of 7.5
percent of AGI, for example, may be deducted under the regular income tax, but the
threshold is 10 percent of AGI under the AMT.
 Tax filers may claim some deductions in addition to the standard deduction or itemized
deductions. These include deductions for contributions to Individual Retirement
Accounts, alimony payments, certain moving expenses, and interest on student loans,
among others. The personal exemption ($3,700 each for taxpayers and their dependents
in 2011) is also, in effect, a deduction, because it reduces taxable income. The value of
all of these deductions depends on the taxpayer‘s marginal tax rate and tax liability.
 Tax credits are subtracted not from taxable income but directly from a person‘s tax
liability; they thus reduce taxes dollar for dollar. As a result, credits have the same
value for everyone who can claim their full value.
 Most tax credits are nonrefundable; that is, they cannot reduce a person‘s tax liability
below zero. As a result, low-income tax filers often cannot get the full benefit of the
credits for which they qualify. Some tax credits, however, are fully or partially
refundable: if their value exceeds a person‘s tax liability, the excess is paid to the
filer. The earned income tax credit (EITC) is fully refundable; the child tax credit
(CTC) is refundable only to the extent that the filer‘s earnings exceed a specified
threshold—
$3,000 in 2011. These two credits accounted for more than 52 percent of the dollar
value of all credits claimed in 2009 (see figure).

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Duties and Taxes
 You may be liable for duties and taxes when you trade with countries outside the
European Union (EU). The terms of sale you agree will determine where liability
for these costs will fall.
 To determine what these liabilities are, Harmonized System (HS) codes are used to
identify goods. For a legally binding decision on the appropriate code for a product, as
applied in Ireland, consult the Revenue office on Binding Tariff Information (BTI).
Enter the code into the Applied Tariffs portion of the Market Access Database or the EU
Taric database for tariff and documentation details.
 The EU operates a number of preferential trade agreements that allow qualifying goods
to claim lower or nil duty rates e.g. Euro-Mediterranean Partnership. See details of
agreements on the Revenue website.
 Goods exported from Ireland are zero rated for Irish Value Added Tax (VAT). Note
though that, if you use an export service, your VAT position may be affected because it
is dependent upon the place of supply. Your local office of the Revenue Commissioners
will advise you on how the rules apply in specific circumstances.
 Tax law is complex. It is strongly recommended that you take advice from
experienced tax specialists on all aspects of the tax treatment of online activity. Check
the Revenue web site for their VAT Guides.

Excise duty and consumer tax

You need to pay duties or consumer tax on some of the goods you use.
Excisable goods
 Products containing alcohol:
o beer
o wine
o Products that are in between (for example port, sherry and vermouth). In between
products have had alcohol that was made by a natural fermentation process
added to them
o other products containing alcohol (such as liquor and perfumes)
 tobacco for smoking (including hookah tobacco), cigarettes and cigars
 mineral oils (for example petrol, diesel oil and LPG)

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Consumer tax goods
 Alcohol free drinks (fruit juice and vegetable juice, mineral water and lemonade)
Tariffs for excise and consumer tax
The excisable goods and the consumer tax goods are divided into tariff categories. The tariffs are
mentioned in the tariff list.
Excise duty and consumer tax
Do you import excisable goods or consumer tax goods? Or do you manufacture those goods in
the Netherlands? This section explains what you need to do! (Excisable goods are products
containing alcohol, tobacco products and mineral oils. Consumer tax goods are non-alcoholic
drinks).
Particulars per type of excisable product
You must pay excise duty for certain products.
Particulars for goods liable to consumer tax
You must pay excise duty for certain products.
You transport excisable goods or you have these goods transported
There are rules governing the transport of excisable goods in the EU. There are different rules for
excisable goods for which the duties have been paid and those for which the duties have not yet
been paid.
You receive excisable goods from another EU country
Do you receive excisable goods from another EU country? If so, you will need a permit.
You receive goods liable to consumer tax from another EU country
Do you receive goods liable to consumer tax from another EU country? If so, you will need
to submit a daily return.
You import excisable goods or goods liable to consumer tax from a non-EU country

If you import excisable goods or goods liable to consumer tax from a non-EU country to the
Netherlands, you are liable for the payment of excise duties or consumer tax.
You manufacture excisable goods and/or goods liable to consumer tax
Do you intend to manufacturer goods subject to consumer tax and/or excisable goods in the
Netherlands? If so, you will need a permit.
You store large quantities of excisable goods and/or goods liable to consumer tax

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Do you intend to store goods subject to consumer tax and/or excisable goods in the Netherlands?
If so, you will need a permit.
You wish to file an excise duty return for a supplier in another EU country

Do you intend to declare the excise duties on behalf of a supplier in another EU country? In that
case you will in certain cases need: a Permit for Distance Selling as a Tax Representative.
Exemption from excise duty and/or consumer tax
Under certain conditions you can be exempted from excise duties.
What it is: Tax liability refers to the amount legally owed to a taxing authority as the result of a
taxable event.

How it works/Example:
A tax liability might also be called a "tax obligation."
A tax authority -- such as a local, state or national government -- imposes taxes upon individuals,
organizations and corporations to fund social programs and administrative roles. Taxable events
include earning taxable income, having sales, receiving or issuing payroll, etc.. These taxes are
legally binding.

The liability is generally calculated by multiplying the taxable event by the tax rate. The taxing
authority has various legal options to enforce these payments.
Why it Matters:
Taxes are important to maintaining all types of government and ruling systems. Entities can be
fined, assets liquidated and even jailed for failing to pay their tax obligations.
Many entities attempt to minimize their liability each year using tax credits, donations,
tax shelters and the like.
Tax havens are countries that enforce little to no tax liability.

Database transaction
A transaction symbolizes a unit of work performed within a database management system (or
similar system) against a database, and treated in a coherent and reliable way independent of
other transactions. A transaction generally represents any change in database. Transactions in a
database environment have two main purposes:

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 1. To provide reliable units of work that allow correct recovery from failures and keep a
database consistent even in cases of system failure, when execution stops (completely or
partially) and many operations upon a database remain uncompleted, with unclear
status.
2. To provide isolation between programs accessing a database concurrently. If
this isolation is not provided, the program's outcome are possibly erroneous.

A database transaction, by definition, must be atomic, consistent, isolated and durable. Database
practitioners often refer to these properties of database transactions using the acronym ACID.

Transactions provide an "all-or-nothing" proposition, stating that each work-unit performed in a

database must either complete in its entirety or have no effect whatsoever. Further, the system
must isolate each transaction from other transactions, results must conform to existing
constraints in the database, and transactions that complete successfully must get written to
durable storage.
Purpose
Databases and other data stores which treat the integrity of data as paramount often include the
ability to handle transactions to maintain the integrity of data. A single transaction consists of
one or more independent units of work, each reading and/or writing information to a database or
other data store. When this happens it is often important to ensure that all such processing leaves
the database or data store in a consistent state.

Examples from double-entry accounting systems often illustrate the concept of transactions. In
double-entry accounting every debit requires the recording of an associated credit. If one writes
a check for $100 to buy groceries, a transactional double-entry accounting system must record
the following two entries to cover the single transaction:

1. Debit $100 to Groceries Expense Account

2. Credit $100 to Checking Account

A transactional system would make both entries pass or both entries would fail. By treating the
recording of multiple entries as an atomic transactional unit of work the system maintains the
integrity of the data recorded. In other words, nobody ends up with a situation in which a debit is

Page 29
recorded but no associated credit is recorded, or vice versa.

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Transactional databases

A transactional database is a DBMS where write transactions on the database are able to be
rolled back if they are not completed properly (e.g. due to power or connectivity loss).
Most modern relational database management systems fall into the category of databases that
support transactions.

In a database system a transaction might consist of one or more data-manipulation statements

and queries, each reading and/or writing information in the database. Users of database systems
consider consistency and integrity of data as highly important. A simple transaction is usually
issued to the database system in a language like SQL wrapped in a transaction, using a pattern
similar to the following:
1. Begin the transaction
2. Execute a set of data manipulations and/or queries
3. If no errors occur then commit the transaction and end it
4. If errors occur then rollback the transaction and end it
If no errors occurred during the execution of the transaction then the system commits the
transaction. A transaction commit operation applies all data manipulations within the scope of
the transaction and persists the results to the database. If an error occurs during the transaction,
or if the user specifies a rollback operation, the data manipulations within the transaction are not
persisted to the database. In no case can a partial transaction be committed to the database since
that would leave the database in an inconsistent state.
Internally, multi-user databases store and process transactions, often by using a transaction ID or
XID.
There are multiple varying ways for transactions to be implemented other than the simple way
documented above. Nested transactions, for example, are transactions which contain statements
within them that start new transactions (i.e. sub-transactions). Multi-level transactions are a
variant of nested transactions where the sub-transactions take place at different levels of a
layered system architecture (e.g., with one operation at the database-engine level, one operation
at the operating-system level) another type of transaction is the compensating transaction.

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Working with Transaction Records

You can create balance forward records for a fiscal year by running the Item Ledger as of
Generation program. This program summarizes item transactions for each general ledger
category code and provides the most accurate and efficient method of updating the records

After you run the As of Generation program, you can compare and reconcile your inventory
balances at the end of one period with the same period end for the general ledger. This is helpful
because the system continues to record inventory transactions after the general ledger periods
close.

Information in the balance forward records allow you to review specific transactions and review
how much of an item (both the quantity and cost amount) that you have in any specific branch,
location, or lot as of specific date. Also, you can also review any transactions for that item that
have taken place after that date.

Complete the following tasks:

 Working with Transaction Records
 Creating Balance Forward Records
 Reviewing "As-Of" Balance Forward Records
 Entering Individual Transactions
 Reviewing Multiple Transactions and Balances
 Reviewing Transactions on General Ledger Reports

Before You Begin

 Verify that no records have been purged from the Item Ledger table
 Verify that you allow an adequate amount of time for the As of Generation program to
run. These procedures can be very lengthy, depending on the number of items that you
want to convert.
 Read Locating On-Hand Quantity Information for information about reviewing
current transaction information on the Item Ledger
Creating Balance Forward Records

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You can keep accurate balance forward records from year to year. You create the balance
forward records for item transactions by running the Item Ledger as of Generation program.
You can run this program using either the complete regeneration method or the partial
regeneration method.

The system records a transaction for the following information, using the primary unit
of measure:
 Data for the entire year, based on your fiscal date pattern
 Cumulative quantity and cost amount totals from the previous years
The system creates a record for each unique combination of the following levels:
 Item number
 Branch/plant
 Location
 Lot
 G/L class
 Fiscal year
After you enter individual transactions to the As Of table (F41112), you create a record for each
of the unique combinations of the levels. When one of these records changes, the system creates
a new balance forward record at each level. However, the system bypasses the item ledger and
G/L transaction accounts.
Use the following data sequence when you run the As of Generation program:
 Item Number-Short
 Branch/Plant
 Location
 Lot
 G/L Class
 G/L Date
What You Should Know About

Topic Description

Complete Typically, you only run the Item Ledger As Of Generation program the first

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Topic Description

regeneration time that you create the As Of table (F41112). However, if you change the fiscal
date patterns on the general ledger, you must completely regenerate this table.
During a complete regeneration, the system processes the information as
follows:

 Verifies records, including those that were in the previous

complete regeneration
 Builds the table based on transactions in the Item Ledger as of the
current date
 Marks all transactions in the table as "summarized" so that they will
not be included in any partial regeneration

Partial After you create the As Of table for the first time, you can run this process at the
regeneration end of each general ledger period to enter new transactions and keep your
balance forward records current.

Loading The system cannot load purged Item Ledger records into the As Of table
incomplete Loading the item ledger records after a purge results in inaccurate totals.
records

Loading sales The system loads only the records for sales orders that have been processed
orders through sales update during the As Of Generation program.

Deleting You can delete information from the As Of table (F41112) with the following
information results:

 Updates the balance forward information but not the Item Ledger
and other general ledger transaction accounts.
 Marks any transactions that you delete as "summarized" in the Item
Ledger and does not reselect them if you run a partial regeneration of
the As of Generation table.
Processing Options
Balance Forward Records

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After you run the Item Ledger as of Generation program, you can inquire on the Inventory As-Of
file in running balance mode. This allows you to review a balance forward record as of a period
end date you choose. The inquiry lists all transactions after that date and calculates the inventory
balance after each transaction. Records have been purged, but it does allow you to inquire on on-
hand balances during the period for which those records have been purged.

Entering Individual Transactions

You might find that you need to enter individual transactions if the Item Ledger table (F41112)
has been purged or if some records were damaged. You can use the Item Ledger As Of
Generation program to enter these transactions.

1. Complete the following fields:

o Item Number
o Fiscal year
o Branch/Plant
o Location

The system displays the total item transaction quantity and amount information for each
fiscal period.

2. Complete the following fields next to the applicable G/L period:

o Quantity
o Amount
3. To enter cumulative transaction information for an item if the system does not display
it, complete the following fields:
o Quantity
o Amount

Reviewing Multiple Transactions and Balances

You can review transaction history, such as sales, receipts, or transfers for each item in your
inventory. This is helpful when you are preparing to reconcile your inventory and need to
review
Page 35
a number of transactions. It is also helpful when you are tracking the original versus the
G/L document type for a transaction.

Also, you can reconcile your inventory quantities by reviewing running balances for items
on Item Ledger (Running Balance).

Reviewing Transactions on General Ledger Reports

You can review inventory transactions on four general ledger reports.
Complete the following tasks:
 Review the Item Ledger Detail Print report
 Review the Item Ledger by G/L Class Code Print report
 Review the General Ledger by Object Account report
 Review the Trial Balance by Object Account report

Reviewing the Item Ledger Detail Print Report

Item Ledger Detail Print is a report that lists the cumulative transactions from balance forward
records prior to the G/L date that you select in the processing options. It is based on the user-
defined G/L dates that you set up in the processing options.
Reviewing the General Ledger by Object Account Report

General Ledger by Object Account is a report that prints your general ledger in object account
sequence. You can select specific transaction documents or all transaction documents. The
system accesses information for this report from the Financial Report Master table (F1011). The
report format includes:

 Balance forward summaries

 Account mode selection
 Sub ledger selection
 Object account summaries

Reviewing the Trial Balance by Object Account Report

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Trial Balance by Object Account is a report that prints trial balances with total postings and
account balances by object account sequence. The system selects information for this report from
the Financial Reporting table (F1011). The report format includes:

 Trial balance by object account

 Account mode selection
 Sub ledger selection
 Object account summaries
Tax Payment Options

If you are not able to pay the tax you owe by your original filing due date, the balance is subject
to interest and a monthly late payment penalty. There is also a penalty for failure to file a tax
return, so you should file timely even if you cannot pay your balance in full. It is always in your
best interest to pay in full as soon as you can to minimize the additional charges. IRS electronic
payment options are the best way for you to pay federal taxes. Paying electronically is the most
convenient and secure way to make tax payments. You can make electronic payments online, by
phone, or from a mobile device. Paying electronically is safe and the IRS uses the latest
encryption technology. You determine the payment date and you will receive an immediate
confirmation from the IRS. It‘s quick, easy, secure, and much faster than mailing in a check or
money order..

Direct Pay is a secure service you can use to pay your individual tax bill or estimated tax
payment directly from your checking or savings account at no cost to you. In just five easy
steps you‘ll receive instant confirmation that your payment has been submitted. Bank account
information is not retained in IRS systems after payments are made. Direct Pay is the
recommended way to pay your individual and estimated tax bill.

If you decide to pay by mail, enclose a check or money order with a copy of your tax return or
notice. Make it payable to the United States Treasury and provide your name, address,
daytime phone number, SSN, tax period, and form number (2014 Form 1040) on the front of
your payment.

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If you cannot pay in full, you should pay as much as possible to reduce the accrual of interest on
your account. You should consider financing the full payment of your tax liability through loans,
such as a home equity loan from a financial institution or a credit card. The interest rate and any
applicable fees charged by a bank or credit card company are usually lower than the combination
of interest and penalties imposed by the Internal Revenue Code.

Full Payment Agreements of up to 120 days

If you cannot pay in full immediately, you may qualify for additional time, up to 120 days to pay
in full. There is no user fee for a full payment agreement request; however, interest and any
applicable penalties will continue to accrue until your liability is paid in full. For information on
full payment agreements of up to 120 days, call us at 800-829-1040 (individuals) or 800-829-
4933 (businesses).

Installment Agreements

If you are unable to pay your balance in full immediately, you may qualify for a monthly
installment agreement. To request an installment agreement, use the Online Payment Agreement
Application (OPA) or complete Form 9465 (PDF), Installment Agreement Request, and mail it to
us. An installment agreement allows you to make a series of monthly payments over time. The
IRS offers various options for making monthly payments, such as:

 Direct debit from your bank account;

 Payroll deduction from your employer;
 Payment by Electronic Federal Tax Payment System (EFTPS);
 Payment by credit card via phone or Internet; or
 Payment via check or money order.

Before a proposed installment agreement can be considered, all filing and payment
requirements must be current. Taxpayers in an open bankruptcy proceeding are
not eligible.

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 The IRS charges a one-time installment agreement user fee of $120 when you enter into a
standard installment agreement or a payroll deduction installment agreement. If you
choose to pay through a direct debit from your bank account, the user fee is $52.
Taxpayers with income at or below 250% of the Department of Health and Human
Services poverty guidelines may apply for a reduced user fee of $43. You can request the
reduced fee by using Form 13844 (PDF), Application For Reduced User Fee For
Installment Agreements. Note: The user fee for restructuring or reinstating an established
installment agreement is $50 regardless of income levels or method of payment.

If you enter into an installment agreement, you should base your monthly payment
on your ability to pay and it should be an amount that you can pay each month to
avoid defaulting.

 If you have not filed your return yet, you may submit Form 9465 (PDF) or attach a
written request for a payment plan that includes the monthly payment amount and
due date to the front of your return.
 If you have filed your tax return and cannot pay in full, you may request an installment
agreement on your current tax liabilities using the Online Payment Agreement
Application (OPA), even if the IRS has not yet issued you a bill (a balance due
notice).
 If you have filed your tax return and cannot provide full payment after receiving a
bill from the IRS, you may request an installment agreement using the Online
Payment Agreement Application (OPA). You also may submit Form 9465 (PDF) or
attach a written request for a payment plan to the front of your bill.
 You may also request an installment agreement by calling the toll-free number on your
bill, or if you do not have a bill, call us at 800-829-1040 (individuals) or 800-829-4933
(businesses).

You must specify the amount you can pay and the day of the month, any day from the
1st to the 28th, on which you wish to make your payment each month. The IRS will
expect to receive your payment ON the date you indicate, so be sure to figure mailing
time (10 days) into the date you select. The IRS will respond to your request, usually
within 30
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days, to advise you if your request has been approved or denied or if more information is
needed.

Installment agreements by direct debit and payroll deduction enable you to make
timely payments automatically and reduce the possibility of default. These convenient
payment methods also allow you to avoid the time and expense of mailing monthly
payments.

For a direct debit installment agreement, you must provide your checking account
number, your bank routing number, and written authorization to initiate the automated
withdrawal of the payment. You may apply online using the Online Payment
Agreement application, contact us by phone or in person, or submit Form 9465 (PDF)
through the mail. The form has space for you to write your checking account number
and your bank routing number or you may staple a voided check to the form.

For a payroll deduction installment agreement, submit Form 2159 (PDF), Payroll
Deduction Agreement. Your employer must complete Form 2159, as it is an agreement
between you, your employer, and the IRS. In some situations, the IRS may set up a
regular installment agreement for you and convert it to a payroll deduction agreement
upon receipt of the completed Form 2159 from your employer.

Please visit Payment Plans, Installment Agreements on IRS.gov for more information
about installment agreements.

Offer in Compromise

If you cannot full pay and an installment agreement will not work, you may want to
propose an offer in compromise (OIC). An OIC is an agreement between a taxpayer
and the IRS that resolves the taxpayer's tax liability by payment of an agreed upon
reduced amount. Before an offer can be considered, all filing and payment requirements
must be current. Taxpayers in an open bankruptcy proceeding are not eligible. To
confirm eligibility and ensure use of the current application forms, use the Offer in
Compromise Pre-Qualifier tool, available on IRS.gov.

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Temporarily Delay Collection

If you cannot pay any of the amount due because payment would prevent you from
meeting basic living expenses, you can request that we delay collection until you are able
to pay. If the IRS determines that you cannot pay any of your tax debt due to a financial
hardship, the IRS may temporarily delay collection by reporting your account as
currently not collectible until your financial condition improves. Being currently not
collectible does not mean the debt goes away, it means the IRS has determined you
cannot afford to pay the debt at this time. Penalties and interest will continue to be added
to the debt. Prior to approving your request to delay collection, we may ask you to
complete a Collection Information Statement ( Form 433-F (PDF), Form 433-A (PDF) or
Form 433-B (PDF)) and provide proof of your financial status (this may include
information about your assets and your monthly income and expenses). The IRS may
temporarily suspend certain collection actions, such as issuing a levy (refer to Topic 201)
until your financial condition improves. However, we may still file a Notice of Federal
Tax Lien (refer to Topic 201) while your account is suspended. Please call the phone
number listed below to discuss this option.

Responding to your IRS Notice

It is important to respond to an IRS notice. If you do not pay your tax liability in full
or make an alternative payment arrangement, the IRS is entitled to take collection
action.

If you are unable to make any payment at this time, please have your
financial information available

Income Tax Extensions: Payments and Penalties Explained

Filing a tax extension gives you six extra months to file your tax return (5 months for
certain business entities) But if you owe taxes, the IRS requires that you still pay by
the original due date of your return

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This may seem a bit counterintuitive to many taxpayers. Isn't the whole point of getting
a tax extension so that you don't have to pay right away?

Unfortunately, no, A tax extension gives you the time you need to prepare a completely
accurate tax return, but the IRS will not wait six months to receive the taxes you owe. If
your tax return comes out better than you had expected, you may get a tax refund. If it
comes out worse than expected, you will have to pay the additional tax due to the IRS.
Despite what you may or may not owe, you are still required to pay by the original filing
deadline.
What If I Don’t Pay?
If you don't pay your income taxes by April 15 (or your business taxes by March 15), the
IRS will most likely assess a late payment penalty and interest charges which
accumulate each month that your taxes go unpaid.

The late payment penalty is 0.5% of the unpaid taxes, assessed on a monthly basis, up
to a maximum of 25%. For example, if you have $2,000.00 in unpaid taxes, the IRS may
charge you $10.00 per month as a late payment penalty (because $2,000.00 x 0.5% =
$10.00).

If your tax is still unpaid 10 days after the IRS issues a ―Notice of Intent to Levy,‖ the
late payment penalty increases to 1.0%. On the other hand, if you filed on time and you
set up an Installment Agreement with the IRS, the late payment penalty decreases to
0.25%.

Keep in mind, you may not be subject to a late payment penalty if you filed a tax
extension on time (by the original deadline of your return) and paid at least 90% of
your tax liability with your extension.

The IRS also charges interest on any outstanding tax balance. Interest is compounded
daily and accrues starting on the due date of your tax return until the day you pay your
taxes. The interest rate is determined on a quarterly basis. Currently, the interest rate
is equivalent to the Federal short-term rate plus 3%.

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 Finally, there is a late filing penalty (also called the failure-to-file penalty) which is
imposed if you owe tax to the IRS and you don‘t file on time. This fee is 5% of the
unpaid taxes, assessed on a monthly basis, up to a maximum of 5 months. If your tax
return is more than 60 days late, the minimum late filing penalty is $135 or 100% of the
tax due, whichever is less.

How to Calculate the Income Tax Payable for a Business

C-Corporations must file IRS Form 1120 by the fifteenth day of the third month following the
end of the corporate tax year. To receive an automatic six month extension of time to file Form
1120, the corporation must prepare and file Form 7004 by the original due date of Form 1120.
The extension only applies to the filing of the corporate tax return, not the payment of corporate
taxes. When an extension is requested, corporate taxes need to be paid at the same time.
Step 1

Prepare IRS Form 1120 by reporting the corporation‘s revenue and subtract cost of goods sold,
and general and administrative expenses to arrive at net income. Cost of goods sold are
applicable to manufacturing and construction entities and include items such as materials, job
costs, direct labor and subcontractors. General and administrative expenses include rent, salaries,
depreciation and amortization and office expenses.
Step 2

Report taxable income on page 1, line 28 of Form 1120. If the corporation has net operating
losses from prior years to offset current year profit, indicate the net operating loss on line
29. Subtract the net operating loss from taxable income and indicate the taxable income,
Step 3

Calculate federal tax on the corporation‘s taxable income using the tax table on page 18 of Form
1120 instructions. For example, if taxable income is $500,000 federal income tax would be
$170,000. The steps to calculate the income tax are as follows: $500,000 - $335,000 = $165,000;
$165,000 x 0.34 = $56,100; $56,100 + $113,900 = $170,000.
Step 4

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Enter the resulting income tax payable on page 1, Line 31 of Form 1120. Reduce the total
income tax payable for any estimated tax payments made during the year and overpayments
applied from prior years.

How to Calculate Taxes Payable

Every company and business must pay its share of taxes if it is in business to make a profit. The
amount of tax the business must pay depends on several factors, but ultimately it is a
percentage of net income. Net income can be adjusted and manipulated downward by tax
credits and write downs such as depreciation. Interest is also tax-deductible. Taxes payable is
an estimate of the total taxes a company must pay on net income. It is listed on the net income
statement as a provision for income taxes.

Instructions

1. Gather your data. You will need to obtain total sales, the cost of goods sold, operating
expenses, any amount paid toward interest on debt and the historical tax rate. You
can find this information by requesting the chart of accounts from your accountant or
financial analyst.
2. Subtract the cost of goods sold from sales. This is referred to as gross profit. Assume
sales are $100,000 and the cost of goods sold is $20,000. The gross profit is $80,000.
3. Calculate operating profit. Subtract operating expenses from gross profit. If operating
expenses are $10,000, operating profit is $70,000.
4. Subtract interest expense. The IRS allows companies to deduct interest expense from
net income before calculating taxes payable. If interest expense is $5,000, the total net
income before taxes is $65,000.
5. Calculate taxes payable. Multiply the historical tax rate by the total net income. If
the historical tax rate is 30 percent, then taxes payable for this example is $19,500.

How do I calculate the amount of sales tax that is included in total receipts?

To calculate the sales tax that is included in a company's receipts from items subject to sales tax,
divide the receipts by 1 + the sales tax rate. For example, if the sales tax rate is 6%, divide the

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total amount of receipts by 1.06. If the sales tax rate is 7.25%, divide the total receipts by 1.0725.

Let's illustrate this technique by assuming that a vending machine contains only items that are
subject to a sales tax of 7%. For a recent month the vending machine receipts were $481.50.
This
$481.50 includes the amounts received for sales of product and for the sales tax on these
products. A little algebra will allow us to calculate how much of the $481.50 is the true sales
amount and how much is the sales tax on the products sold.

Let S = the true sales of products (excluding the sales tax), and let 0.07S = the sales tax on the
true sales. Since the true sales + the sales tax = $481.50, we can state that S + 0.07S = $481.50.
Next we combine the terms and have 1.07S = $481.50. We solve for S by dividing $481.50 by
Hence the amount of true sales is $450. The 7% of sales tax on the true sales is
$31.50 ($450 X 0.07). Now let's prove these amounts: $450 of sales + $31.50 of sales tax
= $481.50, the total amount of receipts from the vending machine.

Let's try another example. If the total amount of receipts including a 7% sales tax is $32,100, the
true sales amount will be $30,000 ($32,100 divided by 1.07). The sales tax on the true sales will
be 0.07 X $30,000 = $2,100. Our proof is $30,000 of sales + $2,100 of sales tax = $32,100. The
accounting entry in general journal form it will be: debit Cash $32,100; credit Sales $30,000;
credit Sales Tax Payable $2,100.

All business transactions must be recorded to the proper journal by double-entry book
keeping.
 Demonstrate the proper use of a T-account
 Explain why the double entry system is used in accounting
Key Points
o Source documents are important because they are the ultimate proof a
business transaction has occurred.
o An account is a part of the accounting system used to classify and summarize the
increases, decreases, and balances of each asset, liability, stockholders' equity
item, dividend, revenue, and expense.

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 o The accounting requirement that each transaction be recorded by an entry that
has equal debits and credits is called double-entry procedure.
o This double-entry procedure keeps the accounting equation in balance.
Terms
 account
A registry of pecuniary transactions; a written or printed statement of business dealings
or debts and credits, and also of other things subjected to a reckoning or review
 debit
An entry in the left hand column of an account to record a debt; debits increase asset
and expense accounts and decrease liability, income, and equity accounts
 credit
An entry in the right hand column of an account; credits increase liability, income, and
equity accounts and decrease asset and expense accounts
Example
Continuing our example, how would we recognize and record the transactions involved in
running our yoga studio? Pre-opening Prior to opening the business, you make the following
transactions:1. You contribute $4,000 in cash to start the business. Cash 4,000, Contributed
Capital 4,000; Assets (+)=Equity(+)2. You purchase $500 worth of mats and other equipment for
use during classes. Cash -500, PPE 500; Assets (+), Assets (-)=03. You purchase an additional
$400 worth of mats, equipment, and clothing for sale at the studio. Cash -400, Inventory 400;
Assets (+), Assets (-)=04. You purchase liability insurance at a total cost of $1,200. The policy
covers July 1 through December31.Cash -1,200, Prepaid Insurance 1,200; Assets (+), Assets
(-) July the following transactions take place during July.1. You receive cash totaling $800 for
classes. Cash 800, Service Revenue 800; Assets (+) = Equity (+)2. Your instructor teaches
classes for the month. You agree to pay $600 for the classes; $300 is paid on July 15, and $300
will be paid on August 3.Cash -300, Wage Payable 300, Instructor Expense 600; Assets (-
300)=Liabilities(+300)+Equity(-600)3. You pay rent for July of $1,000 on July 1. Cash -1,000,
Rent Expense 1,000; Assets (-)=Equity(-)4. You use utilities (electricity and water) totaling
$200. This amount is payable on August 15.Utility Payable 200, Utility Expense 200; Liability
(+)+Equity(-)=0. August The following transactions take place during August.1. You receive
$1,500 in cash for classes. Of this amount, $1,000 was for classes in August. The remainder is

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for 2-month passes allowing unlimited classes in August and September. Cash 1,500, Unearned
Revenue 250, Service Revenue 1,250 Assets (+1,500)=Liability(+250)+Equity(+1,250)2. Your
instructor again earns $600 teaching classes; $300 due on August 16 and $300 on September
1.Cash -300, Wage Payable 300, Instructor Expense 600; Assets (-
300)=Liabilities(+300)+Equity(-600)3. Utilities total $150, payable September 15.Utility
Payable 150, Utility Expense 150; Liability (+)+Equity(-)=04. You pay rent of $1,000 on
August 1.Cash -1,000, Rent Expense 1,000; Assets (-)=Equity(-)5. You sell inventory costing
$150 for a revenue of $225.a. Cash 225, Sales Revenue 225; Assets (+)=Equity(+)b. Inventory -
150, Cost of Goods Sold 150; Assets(-)=Equity(-)6. You are worried about money, so your
Uncle Rafael makes you an offer. He agrees to loan you $2,000 in cash. You will need to repay
him sometime later, but he doesn't say when. Cash 2,000, Loan Payable 2,000; Assets
(+)=Liabilities(+)7. A client is extremely dissatisfied with their class, and demands their money
back. Reluctantly, you agree. The class cost $15.Cash -15, Service Revenue -15; Assets
(-)=Equity(-)8. After borrowing money, you decide to withdraw some of your investment in the
studio to pursue other opportunities. You decide to withdraw $1,000.Cash -1,000, Contributed
Capital -1,000; Assets(-
)=Equity(-)
Journal entries are business transactions that cause a measurable change in the accounting
equation.

(Assets = Liabilities + Stockholders' Equity)

Since business transactions always generate documentation, it is the accountant or bookkeeper's

job to analyze the source document to determine whether a journal entry is necessary. Source
documents are important because they are the ultimate proof of business transactions. Some
examples of source documents include bills received from suppliers for goods or services
received, bills sent to customers for goods sold or services performed, and cash register tapes.
Each source document is analyzed to determine whether the event caused a measurable change in
the accounting equation. If it has, then it is necessary to prepare and record a journal entry in the
proper account.

An account is the part of the accounting system used to classify and summarize the increases,
decreases, and balances of each asset, liability, stockholders' equity item, dividend, revenue, and
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expense. Firms set up accounts for each different business element, such as cash, accounts
receivable, and accounts payable. Individual companies may label their accounts differently.

All accounts have corresponding contra accounts depending on what transaction has taken place;
i.e., when a vehicle is purchased using cash, the asset account "Vehicles" is debited as the
vehicle account increases, and simultaneously the asset account "Bank" is credited due to the
payment of the vehicle using cash. Some balance sheet items have corresponding contra
accounts, with negative balances, that offset them. Examples are accumulated depreciation
against equipment, and allowance for bad debts against long-term notes receivable.

The General Ledger

The General Ledger contains all entries from both the General Journal and the Special Journals.
Using a double entry system to record transactions keeps the accounts in balance.

The accounting requirement that each transaction be recorded by an entry that has equal debits
and credits is called double-entry procedure. This double-entry procedure keeps the accounting
equation in balance. For each business transaction recorded, the total dollar amount of debits
must equal the total dollar amount of credits. If one account (or accounts) is debited for $100,
then another account (or accounts) must be credited for the same amount.
T-accounts
The general ledger of all accounts is, simply, a comprehensive collection of T-accounts -- so
called because there is a vertical line in the middle of each ledger page and a horizontal line at
the top of each ledger page, like a large letter T. The account title will appear above the
horizontal line, and debits and credits will appear to the left and right of the vertical line,
respectively.
Some typical accounts and their normal balances:
 Assets Debit
 Contra Asset Credit
 Liability Credit
 Contra Liability Debit
 Owner's Equity Credit
 Stockholder's Equity Credit

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  Revenue Credit
 Contra Revenue Debit
 Expenses Debit
 Gains Credit
 Losses Debit
T-accounts are so named because of their "T" shape, with the name of the account on top, and
debits and credits on the left and right
An account's normal balance will be the side on which increases are recorded. For example,
assets and expenses normally have debit balances, and liabilities and revenues normally have
credit balances.

Continuing our example, how would we recognize and record the transactions involved in
running our yoga studio?
Pre-opening
Prior to opening the business, you make the following transactions:
1. You contribute $4,000 in cash to start the business.
Cash 4,000, Contributed Capital 4,000; Assets (+)=Equity(+)
2. You purchase $500 worth of mats and other equipment for use during classes.
Cash -500, PPE 500; Assets (+), Assets (-)=0
3. You purchase an additional $400 worth of mats, equipment, and clothing for sale at the studio.
Cash -400, Inventory 400; Assets (+), Assets (-)=0
4. You purchase liability insurance at a total cost of $1,200. The policy covers July 1 through
December31.
Cash -1,200, Prepaid Insurance 1,200; Assets (+), Assets(-)
July
The following transactions take place during July.
1. You receive cash totaling $800 for classes.
Cash 800, Service Revenue 800; Assets (+)= Equity(+)
2. Your instructor teaches classes for the month. You agree to pay $600 for the classes; $300
is paid on July 15, and $300 will be paid on August 3.

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Cash -300, Wage Payable 300, Instructor Expense 600; Assets (-
300)=Liabilities(+300)+Equity(-600)
3. You pay rent for July of $1,000 on July 1.
Cash -1,000, Rent Expense 1,000; Assets (-)=Equity(-)
4. You use utilities (electricity and water) totaling $200. This amount is payable on August 15.
Utility Payable 200, Utility Expense 200; Liability (+)+Equity(-)=0.
August
The following transactions take place during August.
1. You receive $1,500 in cash for classes on August 1. Of this amount, $1,000 is for an initiation
fee. The remainder is for 2-month passes allowing unlimited classes in August and September.
Cash 1,500, Unearned Revenue 500, Service Revenue 1,000; Assets
(+1,500)=Liability(+500)+Equity(+1,000)
2. Your instructor again earns $600 teaching classes; $300 due on August 16 and $300
on September 1.
Cash -300, Wage Payable 300, Instructor Expense 600; Assets (-
300)=Liabilities(+300)+Equity(-600)
3. Utilities total $150, payable September 15.
Utility Payable 150, Utility Expense 150; Liability (+)+Equity(-)=0
4. You pay rent of $1,000 on August 1.
Cash -1,000, Rent Expense 1,000; Assets (-)=Equity(-)
5. You sell inventory costing $150 for revenue of $225.
a. Cash 225, Sales Revenue 225; Assets (+)=Equity(+)
b. Inventory -150, Cost of Goods Sold 150; Assets(-)=Equity(-)
6. You are worried about money, so your Uncle Rafael makes you an offer. He agrees to loan
you $2,000 in cash. You will need to repay him sometime later, but he doesn't say when.
Cash 2,000, Loan Payable 2,000; Assets (+)=Liabilities(+)
7. A client is extremely dissatisfied with their class, and demands their money back.
Reluctantly, you agree. The class cost $15.
Cash -15, Service Revenue -15; Assets (-)=Equity(-)
8. After borrowing money, you decide to withdraw some of your investment in the studio to
pursue other opportunities. You decide to withdraw $1,000.

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Cash -1,000, Contributed Capital -1,000; Assets (-)=Equity(-)

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