Understanding Setup for VAT for Sales Transactions

VAT on sales is payable to the government immediately on dispatch of goods. The sales recognition for VAT for many transactions is concurrent with the dispatch of the goods sold. In some cases, though, the sales recognition might be postponed. You use the VAT Accrual on Sales Method Setup program (P74R2001) to specify which transactions recognize sales concurrently with shipment (concurrent) and which transactions do not recognize sales when the goods are shipped (postponed). For transactions that use the concurrent method, the system writes one set of journal entries. For transaction that use the postponed method, the system writes the debit amounts to transit accounts for the initial transaction, and then writes another set of entries when you recognize the sale.

You set up the concurrent and postponed methods of sales recognition by associating a sales order type and sales order line type combination with a value in the Sales VAT Accrual Method (74R/AM) UDC table. The system reads the method type for the combinations when you run the VAT Accrual on Sales program (R74R2018) to process VAT amounts. You must set up all of the sales order type/sales order line type combinations that you use. If the system does not find in the VAT Accrual on Sales Method Setup table (F74R201) a combination that exists in the F4211 records that you process, the system does not process the record.

You also set up associations between the GL offset account for sales-order-line tax areas and the GL class codes for the Transit VAT account. The system stores the associations in the Transit VAT Account Setup table (F74R202) and uses these associations to determine how to write entries for the Transit VAT account for postponed VAT.