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Record keeping for Flat rate scheme

  • Member
  • 29 posts
  • # 117191

Hi All

I was wondering which is the correct way of record keeping for a company which operates on Flat rate scheme

They have changed now to Quickbooks online and the Flat Rates is set

option 1

So the way i think it should be done is:

Any sales should be 20% with vat ( or relevant tax code )

Any purchases should be recorded as per the tax code of the purchase invoice

QBO is calculating the Flat rate automaticly for the period 

then i move the balance from the VAT account to other income 

Option 2 

Record everything with NO VAT tax code (sales and purchases) 

 

I think option 1 is the better one but will appriciate any advise

 

Thank you

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  • Practice Licence
  • 6 posts
  • # 117193

Bedo said:

Hi All

I was wondering which is the correct way of record keeping for a company which operates on Flat rate scheme

They have changed now to Quickbooks online and the Flat Rates is set

option 1

So the way i think it should be done is:

Any sales should be 20% with vat ( or relevant tax code )

Any purchases should be recorded as per the tax code of the purchase invoice

QBO is calculating the Flat rate automaticly for the period 

then i move the balance from the VAT account to other income 

Option 2 

Record everything with NO VAT tax code (sales and purchases) 

 

I think option 1 is the better one but will appriciate any advise

 

Thank you

”hi I Don’t use Quickbooks, only Sage and Xero but I wouldn’t do flat rate either of the ways you suggested. I process all sales with VAT in the usual way and all purchases with no VST. Xero will then work out the flat rate based on the sales vat entered 

 

  • Member
  • 29 posts
  • # 117194

Hi Louise 

Quickbook does calculate the VAT due as so i have no problem with that, but dont you have balance left in you VAT account after procesing the VAT as if we take sale of 100 net plus 20 VAT = 120, then our flat rate is lets say 12% this means that the vat due will be 14.40 and you will have left 5.60 in the VAT account as balance which is actually an income. Correct me if i am wrong or missing something

  • Member
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  • 6 posts
  • # 117195

Bedo said:

Hi Louise 

Quickbook does calculate the VAT due as so i have no problem with that, but dont you have balance left in you VAT account after procesing the VAT as if we take sale of 100 net plus 20 VAT = 120, then our flat rate is lets say 12% this means that the vat due will be 14.40 and you will have left 5.60 in the VAT account as balance which is actually an income. Correct me if i am wrong or missing something


 Thats right, after you have run VAT you can journal the difference left to other income (or create a new nominal for VAT flat rate income)

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