Accounting for underdeclared VAT

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bigmuggsy
bigmuggsy Registered Posts: 92 Regular contributor ⭐
Hi

Client has a b/fwd VAT creditor of £7000 in the accounts, during the year a VAT assessment calculates underdeclared VAT of £10000, at the end of the year this is still outstanding.

Having credited the VAT liability what would be the best account to debit?

Thanks

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  • mike1983
    mike1983 Registered Posts: 48 Regular contributor ⭐
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    Under-declared sales???

    Well under-declared VAT may mean under-declared sales or over-declared expenditure.

    Therefore, if there is an under-declaration of sales then you would simply debit sales as I assume that the sales under-declared would have been credited to sales at gross.

    The same goes for over-declared expenditure.

    Kind regards

    Mike

    MJH Accountancy Services Ltd
  • bigmuggsy
    bigmuggsy Registered Posts: 92 Regular contributor ⭐
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    Appreciate your reply, many thanks.
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    I think that you can either do it as mike says, or just create an expense account called 'underdeclared VAT'. The latter is simpler if the adjustments relate to a number of different accounts.
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