Sage (Instant Accounts) VAT Question

[AbsolutNut]

Hi,

I know there are some great Sage / accounts bods on here from previous experience.

We became VAT registered March last year and entered our VAT details in to Sage. We are currently preparing our end of year accounts for last year and it has revealed that Sage has incorrectly accounted for VAT on sales prior to registration also.

This has amounted to £20,000 or so too much VAT. We haven't paid this to HMRC of course however it will affect the sales figures for P&L and liabilities for that year.

Is there an easy way I can correct this? I know the exact figure of how much VAT has been charged and just want a simply adjustment to correct this.

We are in the process now of belatedly getting an accountant as are now much busier and simply don't have the time to be getting bogged down in book keeping, Sage and the like. Yes I know, we should have done this before.

Thanks in advance,
Steve

 

[David Griffiths]

Correcting things in Sage would have to be on a transaction by transaction basis, and is hugely time consuming.

If you are going to engage accountants to do the the year end accounts, they will be able to do this with a single journal entry, so I'd leave it to them.

 

[AbsolutNut]

Hello David,

We weren't going to use them for year 1 only for year 2 onwards. We have everything else covered I think - it was just the VAT error.

Do you know what journal entry we would have to make to correct it?

Many thanks,
Steve

 

[johndon68]

We are currently preparing our end of year accounts for last year and it has revealed that Sage has incorrectly accounted for VAT on sales prior to registration also.

Sage would only have done this if, at the time the transactions were entered, they were posted with a Tax Code that had a VAT percentage assigned to it...

As for the journal(s) that need to be entered, do you just want the overall, end of year, figure to be correct or do you want each individual month to be corrected?

John

 

[AbsolutNut]

Hi John,

Just the end of year figure will suffice thanks.

Steve

 

[johndon68]

Thinking about it, journals may not be appropriate, how were the sales entered in the first place, were they sales invoices or bank receipts?

John

 

[AbsolutNut]

Hi John,

They were sales invoices.

Thanks,
Steve

 

[johndon68]

So, for example, you raised an invoice for £100 and VAT was added so instead of the invoice going through as £100 it went through as £120 - is that correct?


John

 

[AbsolutNut]

So, for example, you raised an invoice for £100 and VAT was added so instead of the invoice going through as £100 it went through as £120 - is that correct?


John

Yes that is exactly correct.

Steve

 

[johndon68]

So, assuming the invoices have been marked as paid then your bank account balance must be overstated as, in the example I gave, to pay the invoice a receipt for £120 would have to have been entered?

Sorry for all the questions but it's important to know so the correcting entries can be made.

John

 

[AbsolutNut]

So, assuming the invoices have been marked as paid then your bank account balance must be overstated as, in the example I gave, to pay the invoice a receipt for £120 would have to have been entered?

Sorry for all the questions but it's important to know so the correcting entries can be made.

John

Hi John,

No problem at all - yes they were all marked as paid so you quite right about the bank account balance being overstated.

Thanks,
Steve

 

[Questions&Questions]

I don't use Sage personally but if you simply journal off the 20% from the bank balance won't it the leave a whole host of outstanding debtors on the BS?

 

[johndon68]

So, assuming all the invoices involved have been marked as paid, teh end result is that your bank balance will be overstated by the total VAT amount and the Sales Tax Control account will be wrong by the same ammount so the journals (assuming you are using the standard Sage nominal codes) would be:

DR 2200 (Sales Tax Control) with the amount of the VAT with a T9 tax code
CR 1200 (Bank) with the amount of the VAT with a T9 tax code

John

 

[AbsolutNut]

So, for example, you raised an invoice for £100 and VAT was added so instead of the invoice going through as £100 it went through as £120 - is that correct?


John

Morning,

Sorry had a sleep on it and no actually that is incorrect. The customers have been charged correctly so the £120 charged to customers was correct. It is just that there should be no VAT component in the sale.

The sales figure for the year is 20k less than it should be and the VAT liability is 20k more than it should be.

I suppose ideally we are just seeking a double entry that will both correct the sales figure while simultaneously reducing the VAT liability.

Thanks and sorry for confusion late last night.

Steve

 

[johndon68]

In which case:

DR 2200 (Sales Tax Control) with the amount of the VAT with a T9 tax code
CR 4000 (Sales) with the amount of the VAT with a T9 tax code

John

 

[AbsolutNut]

In which case:

DR 2200 (Sales Tax Control) with the amount of the VAT with a T9 tax code
CR 4000 (Sales) with the amount of the VAT with a T9 tax code

John

Hi John,

I have done that and it has corrected the issue. I have learned a few things over the last few days. Now I can do the P&L once I have sorted the corporation tax liability & dividend payment.

Many thanks indeed!!
Steve