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VAT cash recieved basis

  • 03-02-2017 6:51am
    #1
    Heisenburg81
    Closed Accounts Posts: 322 ✭✭


    Struggling to find a definite answer in realtion to the bookkeeping/accounting treatment of the above.
    Should an entity book sales invoices to their software net of vat and also state debtors net of vat - then when cash recieved there will be excess cash in the debtors ledger which can be moved to vat control with a credit note entry.
    Is this acceptable treatment? Obviously physical invoices will have to be issued vat inclusive.
    You could then have a recurring journal to adjust the cloing vat account up or down for the value of vat on closing debtors?
    If the entity was booking invoices vat inclusive, the vat control would not represent the closing balance owed to Revenue..
    I guess a key point is - does the cash receipts basis give legal effect to owing vat only as it is collected or does the company still owe the vat per invoices and cash receipts basis is merely a concession from Revenue for cash flow easement?


Comments

  • #2
    Paddy001
    Registered Users, Registered Users 2 Posts: 724 ✭✭✭Paddy001


    Heisenburg81 wrote: »
    Struggling to find a definite answer in realtion to the bookkeeping/accounting treatment of the above.
    Should an entity book sales invoices to their software net of vat and also state debtors net of vat - then when cash recieved there will be excess cash in the debtors ledger which can be moved to vat control with a credit note entry.
    Is this acceptable treatment? Obviously physical invoices will have to be issued vat inclusive.
    You could then have a recurring journal to adjust the cloing vat account up or down for the value of vat on closing debtors?
    If the entity was booking invoices vat inclusive, the vat control would not represent the closing balance owed to Revenue..
    I guess a key point is - does the cash receipts basis give legal effect to owing vat only as it is collected or does the company still owe the vat per invoices and cash receipts basis is merely a concession from Revenue for cash flow easement?

    The normal procedure would be you post your invoices as normal (including the VAT) and post receipts as normal. The only difference is when you go to make the VAT return, you only pay sales VAT based on receipts. Accordingly, the VAT on outstanding debtors will be a reconciling item on the VAT control account at the end of the period. The control account doesn't have to agree to the returns submitted - you should however be able to explain the difference if it is queried.


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