Purpose of the TDS Adjustment Journal?
When we want to reverse a Posted Purchase Invoice, we create a Purchase Credit Note (Debit Note) against it. Now, if I have an Invoice with TDS Amount and I need to apply a credit memo against it, then in that case TDS Amount is not reversed.
So, for reversing the TDS and related entries we have to use TDS Adjustment Journal.
So, now let's understand the application of the TDS Adjustment Journal in detail through a transaction.
1) Here, I have posted a Purchase Invoice and also a Purchase Credit Memo.
Check out the General Ledger Entries (Note that the Invoice has TDS Amount)
Check out the Vendor Vendor Ledger Entries (Note that the Invoice & Credit Memo application is not done yet. Hence, the Remaining Amt. is showing.
2) Now, lets do the Offline application of the documents against each other.
After the offline application, the remaining amount would be updated as shown below:
Here, you can notice that the Credit Memo still has a Remaining Amount. So, as mentioned earlier Application of Credit Memo doesn't reverse the TDS Amount. Hence, we have to reverse the TDS Amount and apply it to the remaining amount here i.e. 22 INR in our case.
3) Using TDS Adjustment Journal to reverse the TDS Amount
a) So, Go to Departments/Financial Management/Periodic Activities/Tax Deducted at Source and click on TDS Adjustment Journal.
b) Navigate the Transaction No. lookup and select your TDS Entry Line and Press Tab or Enter. The line will be populated as shown below:
Notice that the Amount here would initially be zero.
But, the Amount in the above screenshot should be populated with the TDS Amount to be reversed. This field is non-editable and hence not meant to be updated manually.
c) So, get the value of the TDS Amount (to be reversed), you have to validate the TCS/TDS % Applied field. So, just go to this field delete the default value (0.00) and press Tab or Enter.
You can see the value is now updated with the respective TDS Amount (to be reversed).
d) Now, you can just post the entry.
Let's check out the General Ledger and Vendor Ledger Entries now:
You can notice the TDS Adjustment Journal Impact on the GL Entries:
Also, notice the TDS Adjustment Journal Impact on the Vendor Ledger Entries:
e) So, now you can apply the remaining amount of Credit Memo with the TDS Adjustment Entry. Hence, both the vendor ledger entries line would be Closed.
Thus, now all vendor ledger entries for the invoice and payment are closed and GLs are perfectly reversed with TDS Amount.
This sums up our topic.
I hope it helps! Thanks!