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Manual settlement of an advance payment and invoice that include tax

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Tax is posted on both the advance payment and the sales invoice. When these transactions are settled on the Open transaction editing page, the double tax entry is reversed.

The following table shows the tax entries that are generated in various scenarios when an invoice and a payment that have tax are settled.

Transaction details Example Tax entries that are generated during settlement
Invoice = Payment

Invoice amount: 12,000.00

Payment amount: 12,000.00
  • Tax on the payment is reversed.
  • IGST interim payable account Cr. 2,000.00.
  • IGST payable account Dr. 2,000.00.
Invoice < Payment

Invoice amount: 6,000.00

Payment amount: 12,000.00
  • Tax on the payment is reversed to the extent of the invoice amount.
  • IGST interim payable account Cr. 1,000.00.
  • IGST payable account Dr. 1,000.00.
Invoice > Payment

Invoice amount: 24,000.00

Payment amount: 12,000.00
  • Tax on the payment is reversed.
  • IGST interim payable account Cr. 2,000.00.
  • IGST payable account Dr. 2,000.00.