LONG LONG story short is: Client has set up manual accounts to use as VAT instead of the one from the software (Xero) so I have now reconciled all of them and they are owe 20k in VAT.
My question is... I have to put a manual journal entry in to record this VAT owed. So I created a VAT owed (asset account) and posted the other side to a suspense account to remove when it comes to the entry coming in from the statments. For those not in the know... bank feed software will NOT allow you to post to the bank account, so normally an entry to the suspense account o then clear later works.
But they are now asking why is it an asset and a liability, I can see her point, but I cant think where else it should go?!
Sorry if I am misunderstanding here, hun, but if you create a credit liability in Xero for underpaid VAT surely the debit adjustment goes against sales or expenses accounts? (Or to p&l reserve if you are doing opening balance adjustments?)
Or, If you are using Xero now, and that will pick up the correct VAT when the bank feed is imported, then the journal is not needed?
You've reconciled something to come up with 20k difference? What is that? Are you ticking up xero to manual paperwork? If so surely manual adjustment needed on manual return only, and Xero vat account is already showing the 20k credit ?
I'm confused about where your at with manual system and software system, so maybe some background to that would help?
Sorry hun! It's late so may have got the wrong end of the stick?!
