Adding Freight and Taxes to a Purchase Order

People will often ask me, “How should I include the cost of tax or freight in my purchase orders?”

While it is true that ESC does not calculate tax automatically on Purchase Orders, you can still include these costs and even have them post to your integrated accounting software. On a Purchase order in ESC you can define each line item as either an Item or an Account. By defining a line item as an account, you enable ESC to post costs directly to that account within your accounting program. For instance: If you select Account for the type on the last line item of your Purchase Order, you can choose any account in your Chart of Accounts that you would like your Item to affect. You can then define how much sales tax you’re being charged in the Price field and post that amount directly to that account.

This process will work for any account in your Chart of Accounts but it is important to ensure you are selecting the correct account for the purpose intended. If you are unsure of which accounts you should use when adding sales tax, freight or any other non-inventory expenditure on a PO, please consult with your local bookkeeper or accountant for guidance.

On the Purchase Order in ESC, when you click the Save and Bill button, the cost of the items on the Purchase Order will post to your accounting program and the amount you defined on the Account line item will be posted to the general ledger account you have specified. You will be able to run reports in your accounting program to see how much money has been posted to these accounts.

If you don’t know the exact amount of the freight or tax when creating the Purchase Order, these items can be added to the Purchase Order later on when you do. If you previously posted the Purchase Order to your accounting software using the Save and Bill button, you don’t want to do so again. Click the Save and Receive button instead to display the Receive Items screen. Receive just the tax and freight items then click Save & Bill to send only those items over to your accounting software.

Written by Justin Egan
Featured in May 2009 Newsletter

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