Being new to accruals/prepayments I tend to get a tad confused, so please excuse the basic question.
I use Sage and when I did the VAT period ending January 2011 I forgot to reconcile the VAT, so consequently when I did reconcile it, the VAT due was different to the submitted return insofar as we had overpaid by £375.
Our year end is March 2011 so the overpayment hasn't been rectified at ye but needs to be accounted for as the next VAT return will have the manual adjustment. Would the Year End journal be Cr VAT and Dr Prepayments?
Also, there was a mistake on wages where an employee was paid her gross salary in March, so wasn't deducted tax, NI or a cash advance that she'd had. As it was our mistake we will be taking it back from her over two months. I can't get my head round the Drs and Crs for this one at all!! The salary journal and HMRC payment is all correct, it's the net wages payment that isn't.
Would the YE Journal be Dr Net Wages and Cr Accruals for the overpaid tax and NI and Dr Net wages and Cr accruals for the cash advance?
May be I'm reading this wrong, but VAT and net wages are balance sheet accounts, the balances are what they are, I don't see the need to journal anything, there is no prepayment as your P&L (Gross wages) is correct.
Accruls and prepayments are the mechanism for ensuring revenues are matched against related costs. You appear to be suggesting moving balances between balance sheet accounts, this doesn't affect the expenses or revenues, it is just a matter of timing of payments, the net wages and vat therefore should reflect what is actually owed which I would have thought they do without any adjustments.
In my opinion I wouldn't do prepayments or accruals for VAT or wages at all. Your VAT will already be showing as a negative liability (i.e. a debit when it should be a credit) you haven't pre-paid it, you've overpaid it. Same with the net wages, the overpayment on the net wages code should also be showing as a negative liability I would put a note in for the accountant explaining what has happened though.
Prepayments are usually used for things like rent/rates paid in advance where only part of it should be included in the current year and accruals for things like professional fees not yet invoiced for, but which should be included in the current year. Wages and VAT overpaid need to remain showing on the BS.
Of course, someone else may have a different view and I stand to be corrected at all times (as long as it's in a nice way!) lol
Ooh, I don't know Anne You said it pretty well too
I've just spent all morning getting year end stuff together for the accountant so my brain is pretty frazzled...lol Wasn't quite sure I got what Debz was saying.
I would be inclined to get back to the accountant and ask her for some help. No offence, but it sounds like you are struggling and if you don't know what you are doing you could make things worse. If you are sending the year end backup to the accountant I would leave it to her to do year end journals, just include an explanation as to what's happened.
I wouldn't attempt to do the prepayments and accruals - let the accountant make the adjustments. However, send a list of them to the accountant and remember it is the net of vat amount figure not the gross. And I agree with Pauline and Ann you don't use accruals/prepayments for VAT and Wages.
You said it pretty well too 
