How to reconcile your VAT in 2 minutes
Copyright 2006 Warrington Web Operates
Reconciling your VAT is amongst the easiest tasks making use of Sage Computer software and yet numerous small organizations appear to struggle using the task.
It’s the finish from the VAT quarter and panic sets in because they’ve to check a lot of reports and they are not completely confident what they may be doing.
When introduced to a brand new client I’ve constantly asked the query “How extended does it take to reconcile your VAT return?” The answer’s I get back vary from a few hours to a couple of days!
The answer I ought to be hearing is no greater than a few minutes. When accounts staff are presented with this, and they typically go on the offensive, stating that it takes them ages to go via all of the reports and check them. Twaddle!
Their response tells me instantly that they don’t completely understand the computer software they are employing. And this doesn’t just apply to Sage Software users either.
Every time a transaction is entered in to the Accounts it truly is automatically collected inside the VAT Manage Accounts, In the case of Sage Software program, Vat on purchases is collected in nominal code 2201 and VAT on Sales is collected in nominal code 2200.
So let?s take a step back to entering the data on per day to day basis.
With Sales invoices it does not really matter if all of your sales are standard rated VAT due to the fact the plan will add 17.5 % (UK) for the net anyway.
In case you have a mixed bag of sales, that’s, you sell goods that are regular (17.5%) exempt, zero or reduced rated. Then your products vat code needs to be set to the rate applicable. If that’s the case then there’s small need to have to worry in regards to the Sales VAT in the quarter finish.
VAT law states that your invoice ought to tell the recipient which vat rate you’ve charged them with
Which brings us for the other side – Once you get a Buy invoice or make a payment the document tells you whether you might have been charged at common rate, exempt rate, zero rate or the 5% decreased rate.
So when you’re getting into the invoices in to sage you need to examine the right tax rate code and that the screen vat quantity says exactly the same because the invoice, if it does not then make the screen say the same. Watch out for those rounding penny differences. On the subject of which, you always round vat down. If we all did then we wouldn’t have these penny differences (Mr Brown does not want all these extra pennies anyway, but don’t quote me on that!)
Now if you know on every day to day basis that each and every Sales invoice has the right vat and every single buy invoice was checked because it was entered. Why commit hours and days in the VAT quarter end checking by means of those same figures?
When all you will need to perform is as follows
1. Have you entered all the transaction more than the VAT quarter? 2. Have you reconciled your bank accounts to the final day of the VAT quarter?
If yes Verify that the balance in nominal codes 2200 Sales Vat could be the exact same as box 1 on the vat return more than exactly the same date range.
Examine that the quantity in 2201 purchase VAT may be the very same as box 4 on the vat return again more than the same date range.
Do they match? They really should do!
Time taken to examine – much less than a minute – even though you now have to archive, print your reports in situation vat individual pays a visit and empty out the control accounts making use of a journal to begin a fresh for the new quarter.
Total time a couple of minutes
VAT isn’t something that turns up in the finish of 3 months, should you let the computer software manage it every day it is possible to sleep easy.
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