I have just taken on a new client and have had to use trial balance to set up accounts on Sage. My query is that the debtors and creditors are shown as net of vat? I asked the accountants and they said it was because the accounts were prepared on a cash accounting basis. However I thought that the closing balances should still be entered as gross as I cant allocate payments received and paid easily as they have vat included. I have had to enter the opening vat as one figure for all debtors and creditors to nom code 2202? Seems crazy to me? Any ideas? Thanks
It's not the best way for them to have done the accounts - but I guess I can see why/how they'd do it that way if they weren't using Sage or similar. You need to split the receipts between VAT and sales. Post the net sales amount to the ledger to clear the balance and post the VAT to the VAT sales output account - all via the bank account obviously so you can reconcile the bank. You'll have to do a manual adjustment on the VAT return at the end of the quarter to get the net sales figure right. Strictly there should be a VAT creditor in the accounts but I assume they ignored that if they've prepared the accounts on the cash accounting basis
Someone else may come along with a better way of doing it as it's quite hard to write what you need to do without actually doing it !!
Thanks so much. I think it is going to involve a lot of guess work as the period is Nov 09 to oct 10, vat returns already done and on top of that a lot of the creditors are abroad so I have ex rate variances and two different vat rates going on! Just to confirm, would you normally not enter vat on either debtors or creditors using sage, even if on cash accounting??
Cash accounting on Sage is quite easy so long as you know what you're doing and check the output at the end before submission of the vat return.
You enter everything as you would normally so your debtor and creditor ledgers show the true positions and the VAT account shows the full liability - but Sage sorts out what needs to actually go on the return in the current period via the bank payments and receipts entered against invoices etc. You have to try to avoid entering payments on account, otherwise it should all work properly
The way you've suggested the previous accountants have done the trial balance indicates they've accounted for the paid sales/purchases in the accounts - and then reserved for the unpaid elements of sales and purchases for that year as debtors/accruals and not taken any account of the VAT liability
Indeed-an absolute nightmare, especially as there are missing invoices against payments and so I have had to enter loads of payments on accounts all at T0 as I have no paperwork-wish I never took this one on! Thanks so much for your help though, just wanted to confirm I was doing the right thing by posting entries including vat but having first setting sage up for cash accounting on 'preferences'.thanks again
