I have always used the standard way of using Sage, but I now have been asked to do someones accounts which use the cash accounting system for the VAT. Is there much difference in this, and where can i get details of how to process invoices/receipts etc the correct way for this type of system?
Sage can be set up for the cash accounting scheme. Basically it is based on cash received and cash paid ie VAT is not paid on a sales invoice until payment has been received for it but also VAT cannot be reclaimed for purchases until they have been paid for.
So long as the box for cash accounting is ticked in Settings then Sage automatically sorts out what should go on the VAT return for you. You enter all invoices, payments and receipts as normal so your balance sheet shows true debtors and creditors but you pay & claim VAT only on what has actually been received and paid in the quarter
Just one more question if i may, when processing for instance a sales invoice or purchase invoice on Sage, how are they posted without the VAT automatically being shown on return, do I have to enter it different (does that make sense?) until payment is made or received?
I'm the same as you, had always done 'normal' VAT accounting on Sage, now I'm cash accounting.
In response to your 'one more question'. You just enter the invoice in the normal manner. The Sage cash accounting VAT ret picks up sales receipts (SR) and purchase payment (PP) transactions, rather than SIs and PIs. It also picks up other forms of receipts and payments so you will still need to check it and look out for payments on accounts. The way I understood HMRC guidance was you should not pay/reclaim VAT on these, but Sage will still include them on the cash accouting VAT return. I keep a separate record in Excel of any payments on account and adjust for them manually bit of a pain, if any one has a better idea I'd be glad to hear it.
Yes that is very helpful thank you very much. Always a bit tricky if you are used to using Sage for many years one way, and now need to use it a very different way!
cash accounting is a lot more technical with entries - if you can size up with right industry for it to be worth cash accounting, if not change to standard straight away. Once on cash accounting hard to change system back so best prior to start. In my experience customers have been advised by hmrc to try cash accounting but for all the extra work its not been worth while (in fact Im sure some have lost out where paying suppliers is becoming late).
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Donna Curling - Complete Book-Keeping Ltd (CBKLtd) - 07939 101900
