Companies are required to report entertainment expenses. The list must be presented in a mandatory format and contain the posting date, the expense amount, the VAT registration number of the receiver, his address and the name of his representative. In the case of internal consumption, the VAT registration number of the consuming business place must be displayed.

Entertainment expenses should be posted to an expense account, which is customized and named accordingly. In CAKR, the Korean Chart of Account, the accounts 53001200 - 53001205, 54001500, 54001550 and 54001590 have been created for the different forms of entertainment expenses.

Three different transaction types exist:

1. Posting to an Employee Account

An employee incurs an entertainment expense and presents the receipts(e.g.cash register receipt, credit card receipt, tax invoice) for refund. To automatically use the FI module to refund the employee, the employee is created as a vendor account (a special account group for employees can be used but is not necessary).

The reference 3-field of the expense line stores the identification of the vendor (the VAT-no of the vendor) displayed in the entertainment list as issuer of the invoice. To enter data in the reference 3-field this field must be customized accordingly with field status groups. To get to this field press the ‘more data’ button on the expense line. The information entered in the expense line item of the document is displayed in the entertainment expense list. Enter the address, company name and representative of the payment recipient in the text line of the expense line item. Use a comma (,) to separate the address, company name and the name of the representative. If an employee has made several entertainment expenses, several expense lines with details can be created. Then all information in the expense lines will appear in the entertainment list, each line as one line in the entertainment list.

CR: Entertainment expenses 1

Entertainment expenses 2

DR: Employee as vendor

2. Posting to a Trading Vendor

The credit posting is posted directly to the vendor. In this case, you are not required to enter information in the reference 3-field of the document because the report finds the identification of the vendor by reading the debit posting line of the document. You can also post to a one-time vendor.

3. Internal Consumption

In this case, the VAT information of the business place entered in the tax jurisdiction code of the expense line item is regarded as vendor information

To enter this type of document, you should proceed as follows:

• Enter the expense line - Do not enter any tax code in the expense G/L maste. The field posting without tax allowed must be checked.
• Enter the B/S line item - Do not enter any tax code.
• Enter a third line item and post it to the output VAT account - Enter the tax amount manually, e.g. 20.000 KRW Enter the base amount manually, e.g. 200.000 KRW Do not activate the checkbox Determine Tax Base.
• Post the document.

In order to execute the above procedure, it is necessary to classify the affected B/S accounts as tax relevant. By activating the checkbox Posting without tax allowed, you can post on these accounts without tax. The G/L account for output VAT must allow direct postings.

The output VAT account must be opened for manual postings.

If you use MM, SD or FI-AA, you can post the net transaction in these modules and manually post the tax amount in FI.

In the case that an employee has received a tax invoice for entertainment expenses, post first the VAT to the vendor to report VAT correctly, then post a transfer of the amount to the employee so that he gets his refund.

Invoice:

DR: Entertainment Expenses

CR: Vendor (also one-time)

Input VAT

Transfer posting:

DR: Vendor (also one-time)

CR: Employee

The input VAT summary report selects the vendor master record and reads the VAT data (representative, type of business, type of industry) from the vendor master record. The entertainment report would report from the master record of the vendor because no information is entered in the reference 3-field and the text field (see case 2 above).

If a tax invoice has not been received for the entertainment expenses, the expense must not appear in the input VAT summary. In this case, it is sufficient to enter the VAT registration number, address, company name and the name of the representative in the expense line item, which is displayed in the entertainment expense list ( see case 1 above).

Use different tax codes to separate the two types of postings. In standard customizing, the tax code X4 is used if a tax invoice has been received. The tax codes Z4 and Y4 are used if a cash register receipt or a credit card slip has been received.

A validation check of the accounting document can be created and customized in such a way so that every time a tax code for entertainment is used and the document is posted to an employee account, the system asks for the VAT-no in the reference 3-field. To achieve this please, read the chapter about validations.

When executing the input VAT summary report (RFUMSV45), exclude tax codes used for entertainment expenses in which a credit card slip or a cash register receipt has been received and select only those tax codes used for tax invoices received.

To create the mandatory entertainment expense list, run the report RFUMSV48.

In the selection screen, enter the G/L accounts used for posting entertainment expenses. You can select and enter a range of tax codes by using the dynamic selections. If you use different tax codes for different transaction types, you can separate these transactions in the reports by specifying various tax codes. Enter the tax codes for tax invoices and credit card slips to the according fields. The report creates only the entertainment list (2) but gives a summary of all transactions with tax invoices, credit card slips and amounts below 100,000 KRW. These data is needed to file the entertainment list (1) which is a summary sheet. The entertainment expenses with tax invoice, credit card slips or amount below 100,000 KRW are not reliable to report the details like VAT-no, address, name and representative.

To create the report, the entertainment expense accounts must be configured in such a way that allows line item display. To do this, activate the flag Line item display in the master record of the G/L account.