VAT CASH Accounting

Aaron C Rescue

I have never some across this before, can you please confirm if I have the general gist correct -

In a 3 month period the bank statement shows -
I PAID my suppliers £117,5000 (£17,500 in VAT)
I received £94,000 in income (£14,000 in VAT)
Mr VAT now owes me £3500. (Yay!)

What is the best practise for dealing with VAT Cash Accounting?
Would you use the bank statements?
So you can reconcile exactly what income and expenditure has been paid for?
Would you give a difinitive cut off and leave out a 'cheque in the post'?

Many thanks

Monsoon

Include cheques you have written but have not yet been banked.
Do not include customer cheques that you've been told are in the post but which you haven't receved/ haven't cleared your bank yet.

That's my take on it.

What software are you using to keep your books?

Aaron C Rescue

Many thanks Monsoon,

I am using Sage, and I am setting up a friends 'books', it has a 'Vat Cash Accounting' option, which is the option he has chosen, and has begun to pay. He essentially wants to do his own books, and has seemingly coped quite well, he has just completed his first 'Vatable' quarter, and want's to ensure that as far as possible everything is correct from April forward.

Monsoon

If you're using Sage and you've got VAT Cash accounting checked, it will automatically calculate the VAT correctly.

Just post things as normal, i.e. what you put into Sage is a replica of exactly what happened in real life.

Aaron C Rescue

Thanks Monsoon - one more question -

I've been working directly from the bank statements, matching any payments up with invoices (where possible - damn those card payments!) and posting the receipts. So following the advice of just putting into sage what actually happened, what would be the best way of recording (in Sage) the following transaction -

My mate's father bought £28k worth of stock for use in the business, this is a loan which is being repaid at a rate of £150-250 a week.

Is the best way around this to simply post the total value of the purchases as an opening balance on a loan account.
Then to Journal that value over into a new bank account (let's call it the bank of mum n dad).
Then Post the supplier invoices to the stock nominal, as normal.
Make supplier payments from the all new 'Bank of Mum n Dad'

I am right in thinking that the above will sort out the VAT (T1) Cash accounting side, and will also free me up to post the repayments as T9 onto the loan account?

(I feel stupid for asking this question - but better safe than sorry!)

SSamuel2007

HI,

I think that if the loan from the same person who supplied the stock and they still hold title until the amount is paid in full, then I would only reclaim the VAT when the payment are made.

If the stock has been paid for in full and the loan is seperate then I can't see why you can't claim all the VAT. In Sage the creditor would be paid in full by the loan and so Sage would automatically reclaim the VAT on a cash basis.

coojee

I don't think you can reclaim the VAT at all as the purchaser was your mate's father, he's the only one who can re claim the VAT. If he's VAT registered then he could " re sell" it to you with VAT on it. Unless you have a VAT receipt you can't re claim the VAT.

On the other hand, if what he's done is paid one if your invoices for you then you can reclaim the VAT. All of it will be reclaimable immediately under cash accounting as SSamuel says.

Aaron C Rescue

Hi guys, thanks for all the help and advice here, I was wondering if you could help me with another problem?

A Sage issue over stock?

The Sage manual instructs you to post opening balance stock items in the first month of trading,and then instructs you to make monthy adjustments


I have a value sitting in nominal 5000 that I need to convert over to Stock.

When I journal the value across to 1001 Stock - it removes the cost of the purchase from the P&L account, and places it in Balance Sheet as an asset.

If I post the value to 5201 Closing Stock - it reflects the value as Stock in the P&L, but nothing is posted as an asset to the Balance Sheet.

What am I doing wrong? Am I missing out a processing stage?

Bluewednesday

Code 5201 takes the value out of purchases as part of the cost of sales calculation so what you should be doing is Dr 1001 and crediting 5201 with the stock amount.

To ensure you are happy then please run a profit and loss statement and you should see it there.

Aaron C Rescue

Thanks very much Blue.

It looks like everything is in the right place now, and hopefully my ETB will now work!