Reconcile sales taxes at year end
Ledger provides two distinct worksheets for sales taxes. They don't serve the same purpose : the Quick Method computes the remittance for an eligible client, the Sales tax reconciliation matches the TB balances against the returns actually filed with the government. This article explains which one to use and how.
Which one to use
Client is registered under the Quick Method
They collect at full rate but remit at the law's reduced rate, keeping the difference as revenue (with a 1% credit on the first bracket).
- Small businesses (annual sales ≤ $400,000).
- Client does NOT claim ITCs/ITRs on current expenses.
- Worksheet produces the return period by period.
Client is on the regular method
You want to verify that GST/HST/QST balances on the TB match the returns filed with the government, and generate the gap entry if any.
- All other clients (majority).
- Reconciles « what was filed » vs « what's on the books ».
- Generates the adjusting entry for the gap.
Not mutually exclusive. A Quick Method client uses « GST-QST Quick Method » to build the remittances, and can also enable « Sales tax reconciliation » to verify that filed returns tie to the books.
GST-QST · Quick Method
Five tabs : Periods, Summary, Benefits, Entry, Configuration. First open takes you to configuration.
Initial configuration
Three things :
- Province : Quebec (GST + QST) or Ontario (HST). Pre-filled from the client's address, editable. Quebec has two taxes (two reduced rates, two columns); Ontario has one harmonized tax (one rate, one column). A « How does the Quick Method work? » link opens help with the rate table.
- Type of main supplies : Services or Goods. Determines the rate schedule (Quebec Services 3.6% fed. / 6.6% prov., Goods 1.8% / 3.4% ; Ontario Services 8.8% HST, Goods 4.4% HST).
- Filing frequency : Annual, Quarterly, Monthly. Determines how many periods are generated between the start date and year-end.
Periods tab : enter gross sales
For each period, enter :
- Gross sales (incl. GST/QST) : brut TTC amount.
- Capital asset purchases (incl. GST/QST) : ITCs/ITRs recoverable even under Quick Method (capital only).
- Prior period cumulative (override) : leave empty for auto-calc (used for the 1% credit).
- Instalments already paid.
The From GL button computes gross sales for you. The window offers three sources : General ledger entries (files whose bookkeeping is done in Ledger), Balance before entries (the imported trial balance as is, for a client who keeps their own books in Xero or QuickBooks) and Adjusted balance (the trial balance plus your adjusting entries). The tax-included amount follows the sheet's province (× 1.14975 in Quebec, × 1.13 in Ontario).
Ledger auto-computes the base, tax collected at the reduced rate, ITCs/ITRs on capital, the 1% credit, Total to remit, Sum payable on the books, Final cheque. In Quebec, two columns (GST and QST); in Ontario, a single column (HST), since there is only one tax.
Each period has a From the GL button. It opens a picker where you select the sales accounts. Ledger pulls the net (sales − refunds) for the period, shows the equivalent TTC (net × 1.14975), and lets you insert HT or TTC directly.
Summary and Benefits tabs
The Annual summary aggregates the periods, ready to print.
The Benefits tab compares the Quick vs Regular method and shows the verdict (« Quick Method benefit : $X » or « Quick Method disadvantage »). It also gives the break-even point on current purchases : the threshold at which the Regular method would become more advantageous. Useful to justify to the client whether to stay on Quick Method.
Entry tab : year-end adjustment
Ledger prepares a 4-line entry :
- Reduction of revenue for the total portion of GST/QST included in gross sales, computed at the regular method.
- Quick Method benefit added as taxable revenue.
- Reversal of the year's debit balance on the taxes-paid account. Pre-filled with the instalments entered in the periods plus prior-period cheques, always editable.
- Accrual of the last unpaid period (typically the last monthly).
Pick the accounts in the dropdowns, then click Submit to adjusting entries. A zero line (for example no instalments paid during the year) is omitted from the entry and its account is not required. Amounts are rounded to the cent and the submitted entry always balances exactly, any residual rounding cent being carried to the benefit line.
Sales tax reconciliation
Three tabs : Parameters, Worksheet, Entry. First open starts with a mini wizard.
Create the worksheet and link accounts
Pick the filing frequency (Annual, Quarterly, Monthly) and the end date of the first return of the year, then Create worksheet.
In Parameters, link the TB accounts to the 6 categories (GST collected, HST collected, QST collected, GST paid, HST paid, QST paid). Ledger pulls balances N and N-1 automatically.
Worksheet tab : enter the filed returns
Three vertical sections :
- Prior year balances. Enter what was declared to the government for the prior year. Ledger shows the TB N-1 balances and the gap automatically, to flag any opening mismatch.
- Per current year's returns. Two modes : Per period (period by period, declared amounts) or Annual total. Pick based on what the client gave you.
- Payments (remittances) of the year. Two methods : A (list cheque by cheque) or B (single total). Optionally, payments after year-end.
An Adjustments / gap reconciliation section allows optional adjustment lines (e.g. amount not declared to the government).
The Reconciliation result appears at the bottom : computed balances vs TB balances. Three cases : Balanced, Gap to adjust (link to Entry tab).
Entry tab : adjusting entry
The entry is pre-filled from the unreconciled gap. Pick the offset account (balancing line), the Recalculate from gap button auto-adjusts, then click Submit to adjusting entries. Default description : « Adjusting entry, sales tax reconciliation ».
Each worksheet has its own Print button. The PDF contains all expanded tabs, with the calculations. The Quick Method also prints per-period detail for the reviewer.