QuickBooks rounds up to $5.01 when I want $5.00
Legacy KB ID: 363
Why, when I use the tax code GST (10%) on an invoice and the total should be $5.00 including tax does it comes up as $5.01?
This is due to the two rounding methods offered by QuickBooks. QuickBooks allows you to calculate tax amounts based on the base price (net price) or alternately on the price inclusive of tax (gross price), both rounds the tax amount to the nearest cent, as required by the Australian Taxation Office.
NET PRICE (not including tax)
Using this method, the base price is used to calculate sale prices and tax amounts. Tax is calculated at 10% of the base price. The sum of the base price and the tax amount will give the gross sale price of the item. To use this rounding method, leave the “amount including tax” checkbox, unticked when you add a new item.
If you sell an item for $5.00 (including tax), QuickBooks will calculate out the base price (in this instance it is $4.55). The tax amount on this figure is 45.5 cents (i.e. 10% of $4.55). The sum of these two amounts would be $5.005 ($4.55 + 45.5 cents). This figure is then rounded to the nearest cent which would make the total $5.01.
GROSS PRICE (including tax)
Using this method, the gross price is used to calculate base prices (not including prices) and tax amounts. The gross price is calculated first and remains the gross selling price of the item. Tax is calculated as 1/11th of this amount.
To use this method, check the “amounts including tax” checkbox, when you add a new item.
If you sell an item for $5.00 (including GST), $5.00 is considered the final selling price of the good. The tax amount on this figure is 45 cents (i.e. 1/11th of $5.00). The remainder is the base price of the good, which in this instance comes down to $4.55.