Specifying finance settings

The Finance settings include the following:

Tax settings.
Profit and loss statement settings.

Tax settings

Taxes on business transactions vary depending on a country’s tax legislation. In 1C:Drive, you can set up sales tax or VAT.

A company can be a tax-exempt organization. For instance, a charity organization. If this is your case, you can set up 1C:Drive so that no tax entries are recorded. To do this:

In the Accounting policy window, on the Finance tab, keep the following checkboxes cleared:
- Registered for a sales tax permit
- Registered for VAT

Setting up sales tax

To set up a sales tax:

In the Accounting policy window, on the Finance tab, in the Sales tax section, select the Registered for a sales tax permit checkbox.

Then you will be able to specify taxable products and the sales tax rate in sales invoices. The following rules will apply:

Posting a sales invoice with taxable products adds tax entries to GL accounts.
This increases tax payable by the tax amount.
Posting purchase documents does not add tax entries to GL accounts.

Setting up VAT

To set up VAT:

In the Accounting policy window, on the Finance tab, in the VAT section, select the Registered for VAT checkbox.

In the Register VAT entries with section, select the options that match your country’s tax legislation requirements:

Option	Description
Source documents (sales invoices, supplier invoices, and so on)	Indicates that VAT entries are added when you post sales and purchase documents. Select this option if your country’s tax legislation does not require to register separate tax invoices for sales and purchase transactions. For instance, the following rules will apply: Posting a sales invoice adds VAT output entries. Posting a supplier invoice adds VAT input entries.
Tax invoices	Indicates that VAT input and VAT output entries are posted when you post tax invoices. Select this option if your country’s tax legislation requires that you register separate tax invoices for sales and purchase transactions. For instance, the following rules will apply: Posting tax invoices issued adds VAT output entries. Posting tax invoices received adds VAT input entries.
Issue automatically based on sales documents	Indicates that tax invoices are generated automatically when you post sales invoices. It is available only if Tax invoices is selected.

Optional: If a company needs to record VAT on advance payments, select the Register VAT entries on advance payments checkbox. Then, under Register VAT entries on advance payments with, select the option that match your country’s tax legislation requirements:

Option

Description

Source documents (bank payments, bank receipts and so on)

Indicates that VAT entries on advance payments are posted when you post cash management documents.

Select this option if your country’s tax legislation does not require separate advance payment invoices for incoming and outgoing advance payments. For instance, the following rules will apply:

Posting cash or bank receipt adds VAT output entries.
Posting a cash voucher or bank payment adds VAT input entries.

Advance payment invoices

Indicates that VAT entries on advance payments are posted when you post advance payment invoices based on cash management documents.

Select this option if your country’s legislation requires separate advance payment invoices for incoming and outgoing advance payments. For instance, the following rules will apply:

Posting an advance payment invoice based on cash or bank receipt adds VAT output entries.
Posting an advance payment invoice based on a cash voucher or bank payment adds VAT input entries.

Enter or select the following:

Field

Description

Default VAT rate

The VAT rate that applies to your company according to your country’s tax legislation. By default, this VAT rate is populated in the business documents.

The VAT rates list is based on the VAT rates catalog.

VAT rounding rule

A rule for rounding VAT amounts in business documents. One of the following:

Per line total. For each line in a business document’s product list, the tax amount is calculated and rounded to two decimal places. Then the tax amounts of each line are added together. This makes the total tax amount.
Per invoice total. For each line in a business document’s product list, the tax amount is calculated and rounded so that the sum of these tax amounts equals to the tax amount calculated on the business document’s total.

Profit and loss statement settings

The Profit and loss statement settings define rules for the following:

Recording income and expenses.
Recording inventory cost.

To specify the Profit and loss statement settings:

In the Accounting policy window, on the Finance tab, in the Profit and loss statement section, select the following:

Field

Description

Cash method of accounting

Indicates that income and expenses are recorded in the period when you actually receive or expend cash.

By default, the checkbox is cleared. This means that the accrual basis method of accounting is used. The following rules apply:

Income is recorded in the period when it is earned.
Expenses are recorded in the period they are incurred.

Inventory valuation method

A method for calculating the value of a company's inventory at the end of the accounting period.

One of the following:

Weighted average. The average cost is assigned to each inventory item. The average cost is determined on the basis of the weighted average cost of the inventory item at the beginning of a period and the cost of similar items purchased or produced during the period.
For instance, at the beginning of the accounting period, a company has 1 chair at 1000$ in stock. Then the company buys another chair at 1500$. At the end of the accounting period, the value of inventory is calculated as follows:

(1000*1+1500*1)/2=1250$
FIFO. Stands for First In, First Out. This method assumes that the inventory items that were purchased or produced first are the items that are sold first. Then the items remaining in stock at the end of the accounting period are the items most recently purchased or produced.
So, the cost of each inventory item is the value of this item in the most recent document that confirms the item receipt.

For instance, at the beginning of the accounting period, a company buys 1 chair at 1000$. Next week, the company buys another chair at 1500$ and then sells 1 chair. At the end of the accounting period, the value of inventory is 1500$.

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