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Ongoing maintenance contracts and vat

  • Associate
  • Practice Licence
  • 20 posts
  • # 117334

My client  wishes  to set up ongoing  maintenance  contracts  for some of his customers.   So for example  his first one is for 1200.00 payable over 12 monthly  installments.  

 

Do we just put on the full invoice  plus vat on the system and pay off as the monies are recieved? Or should  it be done monthly. ,If so how would this  work on the accounts  ie how would the system  be able to keep track  of it ?

 

Thanks 

  • Associate PM.Dip
  • Practice Licence
  • 15 posts
  • # 117336

Hi Elsie

If the clients VAT is calculated on a Cash accounting basis you can account for the monthly payments as they are received. 

If their VAT is on an accrual basis, I would enter the invoice for the full year and account for the VAT in the correct VAT period. When monthly payments are received they are simply applied against the sales invoice in the customer account until it is fully paid.   

Hope this helps.  

Mary 

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