Include Tax or Charge in Valuation or Total?

Consider Tax or Charge field in Taxes and Charges table of purchase or sales transactions has three values.

  • Total
  • Valuation
  • Total and Valuation

Valuation And Total

Let's consider an example to understand an effect of each charge type. We purchase ten units of item, at the rate of 800. total purchase amount is 800. Purchased item has 4% VAT applied on it, and INR 100 was incurred in transportation.

Total:

Tax or Charge categorized as Total will be included in the total of purchase transactions. But it will not have impact on the valuation of item purchased.

If VAT 4% is applied on item, it will amount to INR 32 (at item's based rate is 800). Since VAT is the consumption tax, it should be added value of Purchase Order/Invoice, since it will be included in payable towards supplier. But it should not be added to the value of Purchased item.

When Purchase Invoice is submitted, general ledger posting will be done for tax/charge categorized as Total.

Valuation:

Tax or charge categorized as