Understanding VAT in Unapplied Receipts

When you work with prepayments, the system calculates and posts VAT amounts according to defined tax rate /areas and generates the corresponding journal entries. Afterwards, when you apply an unapplied cash/bank receipt to an invoice, the system reverses the transaction. The system includes the original VAT calculation for the prepayment in the Sales Book, the reversal transactions in the Purchase Book and generates the corresponding journal entries.

The system uses the Unapplied Receipt account to create the journal entry for unapplied VAT receipt. However, it enables the user to set up a different account for unapplied VAT receipts. This has an impact in the system when the account is credited or debited. The prefix for this AAI is configurable.

This table describes updates when you enter an unapplied receipt and post it with this configuration. The account you set up is displayed in bold:

Document Type	Account	Debit	Credit	AAI
RC	Cash / Bank Account	115
AE	Unapplied Receipt		115	RC + Unapplied Receipt GLC
VA	Unapplied VAT Receipt	15		XX + Unapplied Receipt GLC
VA	Sales VAT Payable		15	RT + Tax Area GLC

The XX indicates the configurable AAI prefix. See "Setting Processing Options for Prepayment VAT Setup (P74R3100)"

The following table describes updates when you apply an invoice to the unapplied receipt and post it, according to this configuration. The account you set up is displayed in bold:

Document Type	Account	Debit	Credit	AAI
AE	Unapplied Receipt	115		RC + Unapplied Receipt GLC
AE	Trade Accounts Receivable		115	RCTRAD
VB	Sales VAT Payable	15		RT + Tax Area GLC
VB	Unapplied VAT Receipt		15	XX + Unapplied Receipt GLC

In the case of voiding the application, the system debits the unapplied VAT account with the invoice VAT amount. In the case of voiding a receipt, the system debits or credits the unapplied VAT account according to the calculated VAT amount.