VAT Calculations for Write-Offs
This topic provides the following examples of accounting entries for write-offs.
VAT declaration point set to Invoice for debit and credit items.
VAT declaration point set to Payment.
VAT declaration point set to Invoice for underpayments and overpayments.
This example has two scenarios:
Writing off a debit item.
Writing off a credit item.
Writing Off a Debit Item
A 105.50 EUR invoice, including 5.5 percent VAT, is sent to the customer, and then the item is written off.
Here are the accounting entries:
When the invoice is sent to the customer:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output Final (VO)
5.50
When the item is written off:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
Write-Off
100.00
VAT Output for Write Off (VOW)
5.50
Writing Off a Credit Item
A 105.50 EUR credit, including 5.5 percent VAT, is written off.
Here are the accounting entries:
When the credit item is created:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output for Credits (VOC)
5.50
When the item is written off:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
Write Off
100.00
VAT Output for Write Off (VOW)
5.50
This example has two scenarios:
Writing off a debit item.
Writing off a credit item.
Writing Off a Debit Item
A 105.50 EUR invoice, including 5.5 percent VAT, is sent to the customer and then the item is written off.
Here are the accounting entries:
When the invoice is sent to the customer:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output Intermediate (VOI)
5.50
When the item is written off:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
Write-Off
100.00
VAT Output Intermediate (VOI)
5.50
Writing Off a Credit Item
A 105.50 EUR credit, including 5.5 percent VAT, is written off.
Here are the accounting entries:
When the credit item is created:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output Intermediate (VOI)
5.50
When the customer's credit item is written off:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
Write-Off
100.00
VAT Output Intermediate (VOI)
5.50
This example has two scenarios:
Writing off an overpayment.
Writing off an underpayment.
Writing Off an Overpayment
A 105.50 EUR invoice, including 5.5 percent VAT, is sent to the customer. The customer overpays the amount by 10.00 EUR, and the amount overpaid is written off.
Here are the accounting entries:
When the invoice is sent to the customer:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output Final (VO)
5.50
When the customer overpays the amount:
Accounting Entry
Debit
Credit
Accounts Receivable
10.00
115.50
Cash
115.50
Write Off
9.45
VAT Output Final (VO)
0.55
Writing Off an Underpayment
A 105.50 EUR invoice, including 5.5 percent VAT, is sent to the customer. The VAT declaration point is set to payment. The customer underpays the amount by 10.00 EUR, and the remaining amount due is written off.
Here are the accounting entries:
When the invoice is sent to the customer:
Accounting Entry
Debit
Credit
Accounts Receivable
105.50
User-defined (Revenue)
100.00
VAT Output Intermediate (VOI)
5.50
When the customer underpays the amount:
Accounting Entry
Debit
Credit
Accounts Receivable
95.50
Cash
95.50
VAT Output Intermediate VAT (VOI)
4.98
VAT Output Final (VO)
4.98
Accounts Receivable
10.00
Write-Off
9.48
VAT Output Intermediate VAT (VOI)
0.52