XBert Type: Standard
Accounting Software: Xero
Country Restriction: CA only
Risk Type: Tax Risk
Business Function: Bookkeeping
Overview
This XBert identifies accounts configured as non-GST that have GST amounts recorded against them, indicating potential misconfiguration or misuse.
What It Does
XBert scans accounts in your accounting software that are marked as non-GST but have income or expense journals with non-zero GST amounts in the past year. It flags accounts where the sum of all GST amounts exceeds $10 or is less than -$10.
How It Works
For Canadian tenants, XBert examines accounts with the following criteria:
Income or expense journals in the last year.
Non-zero tax amounts.
Tax names like 'Tax Exempt', 'Tax on Purchases', 'Tax on Sales', 'Sales Tax on Imports', 'Exempt Sales', or 'No Tax'.
If the total GST amount is more than $10 or less than -$10, XBert generates an alert.
Example/Use Case
Zoe changes the default tax setting for the inbuilt Sales account from 'GST on Sales (5%)' to 'Tax on Sales (0%)'. John, unaware of this change, uses the Sales account to create invoices. As a result, GST is not added to the invoices, leading to under-collection of GST.
In another scenario, John creates a new revenue account called 'Other Sales by Zoe' with a default tax setting of 'Tax on Sales (0%)'. Zoe uses this account for invoices that should include GST, resulting in missing GST charges.
In both cases, if audited, the business may be required to pay the missing GST amounts, which could be challenging if the customers have already paid the invoices without GST.
Accounting Software
This XBert applies to Canadian tenants using accounting software such as Xero.
Which Countries It Supports
Canada only.
Processes
This alert falls under the 'Compliance' category, focusing on ensuring accurate tax configurations in bookkeeping.
To resolve, review the recent usage of the account in question:
Determine if the account should have a different default tax setting (e.g., 'No Tax' vs. 'GST on Sales (5%)').
Check if the default tax setting is being overridden incorrectly on transactions.
Consider whether a different account with the appropriate tax setting should be used.
Make the necessary adjustments in your accounting software to ensure accurate GST reporting.