After several years I decided to become VAT registered, as part of my first return I chose to claim back purchase VAT allowed over the previous four years.
I submitted the return and everything has been transferred to the VAT liability account as expected..
JC from purchase tax CA -> JD Vat Liability &
JC from 2204 - manual adjustments -> JD Vat Liability
When I enter the payment receipt from the inland revenue, I know that the VAT liability will be zeroed out by the credit entry from the bank account but what about the credit that has been left in the manual adjustment account, how should I treat this?
OK, so you have no sales VAT, you have moved purchase VAT from 2201 to 2202, and you have manual adjustments. When you move the manual adjustments into 2202, this combined with the journal from 2201 should equal the bank receipt?
There is no sales VAT on this specific return as I am running the business as a part time freelancer and have chosen to run my returns using the cash accounting scheme.
The value in 2202 does indeed match the bank receipt and thus my comment on it being zeroed out once I enter the bank receipt into Sage.
My concern is how to deal with the remaining credit balance on 2204, which was created by entering the historic payment VAT adjustment on the first return. Should I journal to an expense account or just left where it is - if left where it is, what happens at year end?
