How to book tax line amount to Expense account for Non Taxable Entities.

Hi Experts,

How to book the tax amount to expense account for non taxable entities and we using the Average Costing method. We have created tax rates as Recovery Rate is Zero.

Done the PO, Receipt and Move Order issue.

While doing the create accounting we are getting the below entries.

    

Receiving	DR	Receiving Inventory	1000
	CR	Inventory AP Accrual		1000
Delivery	DR	Inventory On hand	1000
	CR	Receiving Inventory		1000
Tax lines--12%	DR	Receiving Inventory	120
	CR	Inventory AP Accrual		120
Move Order Issue	DR	Consumables	1000
	CR	Inventory On hand		1000
Invoice	DR	Inventory AP Accrual	1000
	DR	Inventory AP Accrual	120
	CR	Liability		1120

    

Please any one clarify me where the Receiving Inventory Tax line getting knocked off.