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

This example applies when the VAT declaration point is set to payment, the final payment is applied on the payment 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 3,588.00 EUR, including 19.6 percent VAT, is sent to the customer.

• The prepayment is cleared against the invoice on the payment worksheet.

• The final payment of 2,392.00 EUR is received and applied on the payment worksheet.

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 advance payment is applied against the invoice on the payment worksheet:

   • These are the item distribution lines:

     Accounting Entry	Debit	Credit
     Cash	1,196.00
     Accounts Receivable (AR)		1,196.00
     VAT Output Intermediate (VOI)	196.00
     VAT Output Final (VO)		196.00

   • These are the prepayment distribution lines:

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

4. When final payment is applied against the invoice on the payment worksheet:

   Accounting Entry	Debit	Credit
   Cash	2,392.00
   Accounts Receivable		2,392.00
   VAT Output Intermediate (VOI)	392.00
   VAT Output Final (VO)		392.00