VAT Declaration Point Set to Payment, Prepayment Applied on Direct Debit Worksheet

The examples in this section apply when the VAT declaration point is set to payment, the prepayment is applied on a direct debit worksheet, and VAT transactions must be generated. The example has the following conditions:

• An advance payment of 1,196.00 EUR is received, and the standard VAT rate is 19.6 percent.

• An invoice with the total 3588.00 EUR, including 19.6 percent VAT, is sent to the customer.

• The prepayment is applied to items in direct debit on the direct debit worksheet.

The accounting entries vary based on the selected cash clearing method for the direct deposit business unit.

Cash Clearing Method: None

Here are the accounting entries:

1. When advance payment is created:

   Accounting Entry	Debit	Credit
   Cash	1,196.00
   Advance Payments Received (AR)		1,000.00
   VAT Output Final (VO)		196.00

2. When the invoice is sent to the customer:

   Accounting Entry	Debit	Credit
   Accounts Receivable (AR)	3,588.00
   User-defined (Revenue)		3,000.00
   VAT Output Intermediate (VOI)		588.00

3. When the advance payment is applied against the invoice in a direct debit that is approved on a direct debit worksheet and remitted to the bank:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash	3,588.00
     Accounts Receivable (AR)		3,588.00
     VAT Output Intermediate (VOI)	196.00
     Advance Payments Received		196.00

   • These are the prepayment distribution lines:

     Accounting Entry	Debit	Credit
     Cash		1,196.00
     Advance Payments Received	1,196.00

4. When the Receivables Update process is run on or after the due date:

   Accounting Entry	Debit	Credit
   VAT Output Intermediate (VOI)	392.00
   VAT Output Final (VO)		392.00

5. When you reconcile the bank statement, the system does not generate any accounting entries.

Cash Clearing Method: Payment Entry

Here are the accounting entries:

1. When a deposit is saved or received electronically:

   Accounting Entry	Debit	Credit
   Cash	1,196.00
   Cash Clearing		1,196.00

2. When advance payment is identified as a prepayment on the payment worksheet:

   Accounting Entry	Debit	Credit
   Cash Clearing	1,196.00
   Advance Payments Received (AR)		1,000.00
   VAT Output Final (VO)		196.00

3. When the invoice is sent to the customer:

   Accounting Entry	Debit	Credit
   Accounts Receivable	3,588.00
   User-defined (Revenue)		3,000.00
   VAT Output Intermediate (VOI)		588.00

4. When the advance payment is applied against the invoice in a direct debit that is approved on a direct debit worksheet and remitted to the bank:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash Clearing	3,588.00
     Accounts Receivable (AR)		3,588.00
     VAT Output Intermediate (VOI)	196.00
     Advance Payments Received		196.00

   • These are the prepayment distribution lines:

     Accounting Entry	Debit	Credit
     Cash Clearing		1,196.00
     Advance Payments Received	1,196.00

5. When the Receivables Update process is run on or after the due date:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash	3,588.00
     Cash Clearing		3,588.00
     VAT Output Intermediate (VOI)	392.00
     VAT Output Final (VO)		392.00

   • These are the prepayment distribution lines:

     Accounting Entry	Debit	Credit
     Cash		1,196.00
     Cash Clearing	1,196.00

6. When you reconcile the bank statement, the system does not generate any accounting entries.

Cash Clearing Method: Bank Reconciliation

Here are the accounting entries:

1. When a deposit is saved or received electronically:

   Accounting Entry	Debit	Credit
   Cash	1,196.00
   Cash Clearing		1,196.00

2. When advance payment is identified as a prepayment on the payment worksheet:

   Accounting Entry	Debit	Credit
   Cash Clearing	1,196.00
   Advance Payments Received (AR)		1,000.00
   VAT Output Final (VO)		196.00

3. When the invoice is sent to the customer:

   Accounting Entry	Debit	Credit
   Accounts Receivable (AR)	3,588.00
   User-defined (Revenue)		3,000.00
   VAT Output Intermediate (VOI)		588.00

4. When the advance payment is applied against the invoice in a direct debit that is approved on a direct debit worksheet and remitted to the bank:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash Clearing	3,588.00
     Accounts Receivable (AR)		3,588.00
     VAT Output Intermediate (VOI)	196.00
     Advance Payments Received		196.00

   • These are the prepayment distribution lines:

     Accounting Entry	Debit	Credit
     Cash Clearing		1,196.00
     Advance Payments Received	1,196.00

5. When the Receivables Update process is run on or after the due date:

   Accounting Entry	Debit	Credit
   VAT Output Intermediate (VOI)	392.00
   VAT Output Final (VO)		392.00

6. When you reconcile the bank statement:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash	3,588.00
     Cash Clearing		3,588.00

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash		1,196.00
     Cash Clearing	1,196.00