Accounting Entries for Vouchers with Recoverable VAT Calculated at Net

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