VAT Calculations for Credits That Offset Debits

This topic offers a scenario of credits used to offset debits when the VAT declaration point is set to Invoice and the VAT recalculation flag is set to Y or N, with no discount. The scenario has the following conditions:

  • A 100.00 EUR invoice, including 5.5 percent VAT, is sent to the customer.

  • The customer has a 100.00 EUR credit.

  • The customer's credit is used to offset the amount of the debit.

Here are the accounting entries:

  1. When the invoice is sent to the customer:

    Accounting Entry

    Debit

    Credit

    Accounts Receivable

    100.00

     

    User-defined (Revenue)

     

    94.50

    VAT Output Final (VO)

     

    5.50

  2. When the customer has a 100.00 EUR credit:

    Accounting Entry

    Debit

    Credit

    Accounts Receivable

     

    100.00

    User-defined (Revenue)

    94.50

     

    VAT Output for Credits (VOC)

    5.50

     

  3. When the customer's credit is used to offset the debit:

    Accounting Entry

    Debit

    Credit

    Accounts Receivable

    100.00

    100.00

    Maintenance Control

    100.00

    100.00