I'm hoping somebody can tell me where I'm going wrong. I've always reconciled the VAT accounts on an invoice basis, but have recently joined a company who do their VAT on a cash basis. The control accounts don't seem to have been reconciled...ever!
So far I've taken the balances of the three control accounts at the end of December (our last VAT period) after the VAT transfer has been done. From what I can work out, the Purchase VAT control should equal the VAT element on the aged creditors for the same date, and same for the Sales VAT control with the aged debtors - is this right?
On that assumption, I've come up with differences on the sales and purchase control accounts, which if I net them off to the VAT liability account would only leave a small difference. The problem is that if I post this, and then try to reconcile at todays date using the VAT return produced by Sage and the current aged debtors and creditors, I'm again left with big differences on the control accounts!
In an ideal world, yes... provided all of the company's sales attract VAT then, if you take the aged debtors figure and work out what the VAT element is, that should approximate to the sales/output VAT figure at the same date. I wouldn't expect it to be exact because there may be rounding differences which will accumulate - the more invoices, and the longer the period, the more that'll be - but it will still only be a marginal amount.
Similarly, with the aged creditors, if you perform the same calculation then you would normally expect the purchase/input VAT to be less than the figure you come to, because it's rare for all the suppliers to be VAT registered. Work out which of the suppliers aren't VAT registered and deduct their balances from the aged creditors balance before working out the VAT, and it should be about right.
However, what you also need to take into account are late transactions: Payments and receipts that have been entered after the VAT return has been processed and the transactions flagged as such on Sage, but are dated within that VAT quarter.
To establish the value of these, run a VAT return for the last quarter that has been processed (a new one, don't just open the one that's been done). Sage will warn you that a VAT return has already been done - accept that, and you'll get a VAT return on screen made up of those late transactions. Print it, and take the figures into account on your VAT reconciliation - but do not under any circumstances click "Reconcile" !
You might - SHOULD - find the outputs and inputs on that return equate to the difference you had on the sales and purchases VAT accounts.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Agree with most of what Vince is saying. You cannot go with the figures on the purchases/sales ledgers and take 20% from each total.
With respect to the purchase ledger, you will not just non-VAT registered businesses but also outstanding amounts relating to zero-rated or exempt supplies (i.e. business rates) to deal with. It may be simply that you will find negative balances on the ledger where your client has OVERPAID the supplier.This will all have to be accounted for.
"With respect to the purchase ledger, you will not just non-VAT registered businesses but also outstanding amounts relating to zero-rated or exempt supplies"
Yes. That's what I actually meant to say. I must have had a brain-fart.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
There are two reports in Sage which will help you with the VAT element of your unpaid Debtors and Creditors. They are called "VCA to STANDARD" which I believe is short for VAT Cash to Standard accounting. You might have to download these as additional reports from Sage if they are not already listed in your Customer and Supplier Reports menus. These reports display the VAT element of each unpaid invoice - a debtor/creditor report with a VAT analysis. You can tick the "exclude later payments" box as you do for a standard debtors/creditors report so you can reconcile the total to the control accounts on the TB as at the date you are reconciling your VAT. The reports don't include Payments on Account, but you should be able to identify these, and the VAT included in the return (but not in the control account balances) from the VAT return detail report. As earlier posters have said, it's unlikely you will reconcile with NIL difference and I am usually happy with a small difference - just keep an eye on it every quarter. There are other reasons why the control accounts might be incorrect eg incorrect journal entries - try checking past VAT journals particularly if there are EU VAT entries, and also look for any other T9 transactions which might have been posted to the wrong nominal code. Its much quicker to do this is you download to a csv or Excel file.
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Sheelagh Lyons Bookkeeping Clarity Making Bookkeeping Clearer
The answers I provide are meant as a general guide only and do not constitute advice.
Hi Further to my earlier post, I have just found out that there are two BANK reports - VCA purchase Control and VCA sales control - in the bank module which list the VAT analysis of payments on account.
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Sheelagh Lyons Bookkeeping Clarity Making Bookkeeping Clearer
The answers I provide are meant as a general guide only and do not constitute advice.
