I have a quick question about making a manual adjustment on a Sage generated VAT Return:-
A journal for £123000 with a tax code of T0 was incorrectly entered onto Sage which consequently has been included in Box 7 of the VAT return (Total Value of Purchases Excluding VAT).
A correcting journal has now been posted to correct the previous error, however the correcting journal amount of £123000 (tax code T0) is showing in box 6 (Total value of Sales Excluding VAT) not box 7.
To my mind this now means that the figures in Boxes 6 & 7 on the return are now incorrect having been distorted by the above journals. I am mindful that I do not want to precipitate a VAT inspection for my client because of this, so should a manual adjustment be made to the VAT return on Sage to ensure that the Sales and Purchase figures on the return are not distorted (ie decrease the sales figures in box 6 by £123000 and increase the purchase figures in box 7 by the same amount)?
Has a return been submitted with the incorrect figures? I'm assuming not
If not then yes I would certainly adjust as you say. It's not just a tiny amount and the net effect of your adjustment is zero anyway so from an HMRC perspective, they don't need to see those incorrect figures and raise a red flag.
Yes, you've fallen into a basic trap that can catch out even experienced folk - when a journal is posted that has a tax code that includes it on a return, Sage doesn't do anything other than look at whether it's a debit or a credit to determine which box it belongs in. And because it's a journal, it can't be deleted or corrected. Sage can't be reasoned with, it doesn't show pity, or remorse, or fear, and it absolutely will not concede until you are inspected... sorry, channeling Kyle Reese from The Terminator there.
The easiest solution is to do as Clare says.
If you want to keep things tidy, though, it should (in theory - I've never done this before and I'm making it up as I go) be able to fix in Sage with a few cunningly thought out transactions.
The only flaw is that it won't work if you've already 'reconciled' the VAT return, and the transactions already flagged - in that case, these transactions will screw up your *next* return, so don't do it; refer to Clare's suggestion.
To start with, to clarify the situation:
The original journal has increased your box 6 figure by £123,000
The correcting journal has increased your box 7 figure by £123,000
Result: Both boxes are showing £123,000 too much.
Solution:
* Create a dummy sales ledger account.
* Post a T0 credit note for £123,000 - that should reduce the box 6 total by £123,000.
* Post a T9 invoice for £123,000 - that won't affect the VAT return
* Allocate the T9 invoice against the T0 credit
* Create a dummy purchase ledger account.
* Post a T0 credit note for £123,000 - that should reduce the box 7 total by £123,000.
* Post a T9 invoice for £123,000 - that won't affect the VAT return
* Allocate the T9 invoice against the T0 credit
Just in case I haven't thought it through fully and I've given you duff advice, make sure you take a back up first (but it looks to me as though it should work). If the results aren't as expected, restore your back up and double check your workings. (Perhaps even recreate the situation in the practice data and try it out there first?)
Also: Make sure you fully document what you've done, and the reasons why. This is in case you ever have an inspection in future, and the inspector spots these dummy invoices/credits and queries them.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Yes, you've fallen into a basic trap that can catch out even experienced folk - when a journal is posted that has a tax code that includes it on a return, Sage doesn't do anything other than look at whether it's a debit or a credit to determine which box it belongs in. And because it's a journal, it can't be deleted or corrected. Sage can't be reasoned with, it doesn't show pity, or remorse, or fear, and it absolutely will not concede until you are inspected... sorry, channeling Kyle Reese from The Terminator there.
Another reason not to use Sage My first thoughts were, if a correcting journal was made, surely that would reduce the purchase total. Obviously not!
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
How does Sage know it is a "correcting" journal, and not just another journal? There's nothing in the journal entry screen that you select or enter to tell *Sage* the purpose of the journal. All you can tell it is where the amounts are going (the nominal codes) and whether to include any of them on a VAT return (via the tax code).
One possibility would be for the software to be updated to determine the right box based on the nominal code - but then you have to make that fully configurable because and absolutely idiot proof, because Sage is incredibly versatile in terms of what you can put where in the nominal structure.
Base it on the chart of accounts? Which chart of accounts, given that you can set up any number to act on a single set of figures for different purposes?
This isn't a fault with Sage, per se, but a limitation caused by its versatility and configurability (which the spewing chucker is telling me is an error - I must have just made up that word).
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I'm sure it should be a perfectly valid word, even if it actually isn't - and the spew chucker in Firefox is telling me it isn't.
I know I can add it to the dictionary, but that's beside the point.
I can understand words like Overpuddlian, Dahnundaland, confuzzle, and so on (and relevant derivations thereof) not being recognised: I made the buggers up. But configurability should be valid. Why isn't it a valid word, damn it? Configurability - the ability to be configured.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Alongside the BKN dating page plus cake ordering page (oh was hat last bit in my imagination) we need a BKN dictionary corner for your fabulous words Vince. Or a BKN translate page for the newbies.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Overpuddlians = people from Overpuddle. Overpuddle comes from "over the puddle" with the puddle in question being the Atlantic.
Dahnundalandians = people from Dahnundaland. Dahnundaland is the land dahnunda (down under) that was sang about in the early 1980s by a popular beat combo called "Men at Work." The word is an attempt at expressing the name of the country in the Dahnundalandian accent. Spellings can vary because I don't use it often and I keep forgetting.
Confuzzle = to both confuse and puzzle someone at once. Derivations include confuzzlement (a mixture of confusion and puzzlement) and similar.
HTH :)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
My first thoughts were, if a correcting journal was made, surely that would reduce the purchase total. Obviously not!
