Accounting Entries for VAT Transactions
There are several types of VAT transactions. This section discusses accounting entries for vouchers with:
Recoverable VAT calculated at gross.
Recoverable VAT calculated at net.
Recoverable inclusive VAT.
Recoverable inclusive VAT calculated at net.
The following examples use this additional information, unless otherwise specified:
Record Input VAT is selected.
VAT is calculated at gross.
The VAT calculation type is Exclusive.
The VAT declaration point is Invoice Date.
The VAT tax rate is 10 percent.
VAT is 100 percent recoverable.
VAT Calculated at Gross or Net
Discounts determine the difference between VAT calculated at gross and VAT calculated at net. Calculating at gross uses the gross amount that you enter on the voucher when determining the VAT basis amount. Calculating at net assumes discounts are always taken. The VAT amount is the gross amount minus the net discounts.
Calculating VAT at gross:
Gross amount = 10000
Discount = 2 percent
Gross = 10000 (VAT basis amount)
Calculating VAT at net:
Gross amount = 10000
Discount = 2 percent
Net = 10000 - (10000 * .02) = 9800 (VAT basis amount)
Note: You cannot select the Recalculate check box on a payment when you are calculating at net.
VAT Calculation Types
There are two types of VAT calculation methods: exclusive and inclusive.
VAT Exclusive: The VAT amount reported on the supplier's invoice and entered into PeopleSoft Payables from the merchandise amount.
The system generates a calculated VAT amount that is used to check tolerances. The system calculated amount is gross (merchandise amount) * VAT code %.
VAT Inclusive: The VAT amount is not reported separately on the supplier's invoice but is included in the merchandise amount.
Because the VAT amount is included in the gross amount, it is necessary to determine the expense distribution portion using the following equation:
Gross - (VAT Code % * distribution expense) = distribution expense
PeopleSoft calculates the distribution expense by substituting in the appropriate values:
Gross Amount = 10000
VAT Code = 10%
Expense Distribution = x
10000 - .1x = x
10000 = x + .1x
10000 = 1.1x
x = 10000 / 1.1
x = 9090.91
The Include Freight and Include Misc Charges (include miscellaneous charges) options are not valid if the VAT calculation type is inclusive.
VAT Declaration Point
The VAT declaration point determines the date on which VAT input is recognized. There are four possible dates:
Accounting.
Delivery.
Invoice.
Payment.
The Record Input VAT option must be selected. For accounting purposes, accounting, delivery, and invoice declaration points create the same entries; an entry is made to a VAT input account when the voucher posts.
Payment generates an accounting entry to a VAT input intermediate account when the voucher posts. This entry reverses and posts to the VAT input account when the payment posts.
The VAT use type determines the percentage of the VAT input that is recoverable and the percentage that is a nonrecoverable amount.
The following examples illustrate accounting entries for vouchers with recoverable VAT calculated at gross.
Action: Voucher Entered and Posted
The system calculates the VAT amount using the VAT basis amount (10000), the VAT rate (10 percent), and recoverable percentage (100 percent). The VAT calculation type is Exclusive; therefore you must enter a VAT amount on the Voucher Invoice Information page or on the VAT Header page.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
10000 |
EUR |
10000 |
EUR |
|
|
DEU01 |
VAT Input Recoverable |
1000 |
EUR |
1000 |
EUR |
10000 * .1 |
|
DEU01 |
Accounts Payable |
(11000) |
EUR |
(11000) |
EUR |
|
Action: Payment Entered and Posted, Discount Not Taken
The payment accounting entries for this example are no different from those for the standard voucher example, but a balance exists in the VAT Input Recoverable account.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
DEU01 |
Cash Distribution |
(11000) |
EUR |
(11000) |
EUR |
Action: Payment Entered and Posted, Discount Taken
The payment accounting entries for this example are no different than those in the standard voucher example. The differences are the calculation of the discount, based on the total merchandise amount including the VAT, and the balance in the VAT Input Recoverable account.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(10800) |
EUR |
(10800) |
EUR |
11000 - ((11000 - 1000) * .02) |
|
DEU01 |
Discount Earned |
(200) |
EUR |
(200) |
EUR |
(11000 - 1000) * .02 |
Action: Payment Entered and Posted, Discount Taken, Recalculate at Payment
When you recalculate at payment, you can create adjusting entries to reduce the amount of recorded VAT based on payment discounts. This is only true when VAT is set to calculate at gross. The system assumes 100 percent recoverability of VAT unless set up differently.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(10780) |
EUR |
(10780) |
EUR |
11000 - (11000 * .02) |
|
DEU01 |
Discount Earned |
(220) |
EUR |
(220) |
EUR |
11000 * .02 |
|
DEU01 |
Discount Earned Adjust Due to VAT |
20 |
EUR |
20 |
EUR |
1000 * .02 |
|
DEU01 |
VAT Input Rec. Discnt Adjust |
(20) |
EUR |
(20) |
EUR |
1000 * .02 |
The following examples illustrate accounting entries for vouchers with non-recoverable VAT calculated at gross.
Action: Voucher Entered and Posted
The system calculates the VAT amount using the VAT basis amount (10000), the VAT rate (10 percent). The VAT calculation type is Exclusive; therefore you must enter a VAT amount on the Voucher Invoice Information page or on the VAT Header page. The VAT amount is NON-recoverable and it is prorated into the Expense Distribution.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
11000 |
EUR |
11000 |
EUR |
10000+(10000*.1) |
|
DEU01 |
Accounts Payable |
(11000) |
EUR |
(11000) |
EUR |
|
Action: Payment Entered and Posted, Discount Not Taken
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
DEU01 |
Cash Distribution |
(11000) |
EUR |
(11000) |
EUR |
Action: Payment Entered and Posted, Discount Taken
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(10800) |
EUR |
(10800) |
EUR |
11000 - ((11000 - 1000) * .02) |
|
DEU01 |
Discount Earned |
(200) |
EUR |
(200) |
EUR |
(11000 - 1000) * .02 |
Action: Payment Entered and Posted, Discount Taken, Recalculate at Payment
When you recalculate at payment, you can create adjusting entries to reduce the amount of the prorated VAT based on payment discounts. This is only true when VAT is set to calculate at gross.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
11000 |
EUR |
11000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(10780) |
EUR |
(10780) |
EUR |
11000 - (11000 * .02) |
|
DEU01 |
Discount Earned |
(220) |
EUR |
(220) |
EUR |
11000 * .02 |
|
DEU01 |
Discount Earned Adjust Due to VAT |
20 |
EUR |
20 |
EUR |
1000 * .02 |
|
DEU01 |
Expense Distribution (Expense Adjustment) |
(20) |
EUR |
(20) |
EUR |
1000 * .02 |
The following examples illustrate accounting entries for vouchers with recoverable VAT calculated at net.
Action: Voucher Entered and Posted, VAT Calculated at Net
Calculating at net assumes discounts are always taken. In this example, the entry to the VAT Input Recoverable account is net of the discount. Based on the amount and tax code specified on the voucher line, less the discount, the system calculates a VAT amount; as the VAT calculation type is Exclusive, the user must enter a VAT amount.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
10000 |
EUR |
10000 |
EUR |
|
|
DEU01 |
VAT Input Recoverable |
980 |
EUR |
980 |
EUR |
(10000 - (10000 * .02)) * .1 |
|
DEU01 |
Accounts Payable |
(10980) |
EUR |
(10980) |
EUR |
|
Action: Payment Entered and Posted, Discount Not Taken, VAT Calculated at Net
Because the discount is not taken, and the VAT input is calculated net of the discount, it appears necessary to account for the difference at payment time. However, because you enter the VAT amount on the header, the system has no way of knowing whether a discount should be added. The system proceeds as if you entered the full VAT amount.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10980 |
EUR |
10980 |
EUR |
|
DEU01 |
Cash Distribution |
(10980) |
EUR |
(10980) |
EUR |
Action: Payment Entered and Posted, Discount Taken, VAT Calculated at Net
Because the VAT amount is user-entered, the system has no way of knowing whether a portion of the discount should be subtracted. Therefore, the entire discount amount is deducted.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10980 |
EUR |
10980 |
EUR |
|
|
DEU01 |
Cash Distribution |
(10780) |
EUR |
(10780) |
EUR |
|
|
DEU01 |
Discount Earned |
(200) |
EUR |
(200) |
EUR |
10000 * .02 |
The following examples illustrate accounting entries for vouchers with recoverable inclusive VAT.
Action: Voucher Entered and Posted
The calculation assumes the VAT amount is included in the gross amount that you entered on the voucher header. The system automatically makes the calculations.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
9090.91 |
EUR |
9090.91 |
EUR |
10000 / 1.1 |
|
DEU01 |
VAT Input Recoverable |
909.09 |
EUR |
909.09 |
EUR |
9090.91 * .1 |
|
DEU01 |
Accounts Payable |
(10000) |
EUR |
(10000) |
EUR |
|
Action: Payment Entered and Posted, Discount Not Taken
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10000 |
EUR |
10000 |
EUR |
|
DEU01 |
Cash Distribution |
(10000) |
EUR |
(10000) |
EUR |
Action: Payment Entered and Posted, Discount Taken
Because the discount is taken and the system is set to account at gross, it is necessary to account for the discount at time of payment. The VAT amount is not adjusted by the discount.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10000 |
EUR |
10000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(9818.18) |
EUR |
(9818.18) |
EUR |
10000 - ((100000 / 1.1) * .02) |
|
DEU01 |
Discount Earned |
(181.82) |
EUR |
(181.82) |
EUR |
(100000 / 1.1) * .02 |
Action: Payment Entered and Posted, Discount Taken, Recalculated at Payment
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10000 |
EUR |
10000 |
EUR |
|
|
DEU01 |
Cash Distribution |
(9800) |
EUR |
(9800) |
EUR |
10000 - (10000 * .02) |
|
DEU01 |
Discount Earned |
(200) |
EUR |
(200) |
EUR |
10000 * .02 |
|
DEU01 |
Discount Earned Adjust Due to VAT |
18.18 |
EUR |
18.18 |
EUR |
909.09 * .02 |
|
DEU01 |
VAT Input Rec. Discnt Adjust |
(18.18) |
EUR |
(18.18) |
EUR |
909.09 * .02 |
The following examples illustrate accounting entries for vouchers with recoverable inclusive VAT calculated at net.
Action: Voucher Entered and Posted
In performing the calculation, the system assumes that the discount is taken and the VAT amount is included in the header gross amount.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
9107.47 |
EUR |
9107.47 |
EUR |
|
|
DEU01 |
VAT Input Recoverable |
892.53 |
EUR |
892.53 |
EUR |
8925.32 * .1 |
|
DEU01 |
Accounts Payable |
(10000) |
EUR |
(10000) |
EUR |
|
Action: Payment Entered and Posted, Discount Not Taken
The VAT is not adjusted, even though it is calculated at net (minus the discount).
|
GL Business Unit |
Ledger |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|---|
|
DEU01 |
Primary |
Accounts Payable |
10000 |
EUR |
10000 |
EUR |
|
DEU01 |
Primary |
Cash Distribution |
(10000) |
EUR |
(10000) |
EUR |
Action: Payment Entered and Posted, Discount Taken
Because the discount is taken, and the system is set to account at gross, it is necessary to account for the discount at time of payment. The VAT amount is not adjusted by the discount.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
10000 |
EUR |
10000 |
EUR |
|
DEU01 |
Cash Distribution |
(9817.85) |
EUR |
(9817.85) |
EUR |
|
DEU01 |
Discount Earned |
(182.15) |
EUR |
(182.15) |
EUR |