Sage Write Off Help

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Portandy
Portandy Registered Posts: 15 New contributor 🐸
in General accounting discussion
Hi,

We have received a partial payment from the liquidators of a company.

We wrote off the invoices in 2008 and reclaimed the VAT.

What transaction should I do to record the payment and recharge for VAT on this partial payment.

I was thinking DR Bank 1200 & CR Bad Debt 8100 to record the payment, but where does the VAT get involved?

Many thanks for any help you can offer.

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  • Bowdent
    Bowdent Registered Posts: 22 New contributor 🐸
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    You need to treat the dividend as being VAT inclusive and pay that element back to the VAT man.

    For example, if you've recieved £1,000 as a dividend from the liquidator, £148.94 of it will be VAT and £851.06 is yours.

    Therefore your double entry would be:

    Dr Bank account (BS) £1,000
    Cr VAT account (BS) (£148.94)
    Cr Bad Debt (P&L) (£851.06)

    Please leave feedback if this helped / you need further help with it.
    Cheers
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    Hi,

    If the debt was written off in 2008 should this not be included in turnover as a 'bad debt recovered' ?

    Is it correct to net off in 8100 (an expense line) against other possible bad debts for the current year?

    Perhaps Steve could clarify the rules for this?
  • Bowdent
    Bowdent Registered Posts: 22 New contributor 🐸
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    Portandy asked the same question in a sub forum where the main discussion has happened and been resolved.

    The original transaction would've originally created a credit in sales, a credit in the VAT account, and a debit in debtors.

    Then when they were fairly sure they werent going to receive the funds, they would've written off the debt by: Crediting Debtors, debiting VAT, Debiting a Bad Debt Expense nominal on the P&L.

    As they have now received some of that debt, it needs to be treated as a negative bad debt expense. If they were to put it in Sales, they would be double counting it in sales, and hence sales would be overstated - as it was already reported with the original sales transaction.
    When you write off a debt, you dont reduce your sales, but include it as an expense to the business.

    Hope this clarifies.

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