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Pre-Registration VAT accounting entries

  • 6 posts
  • # 119471

Looking for suggestions of which nominal code to use for pre-registration VAT element of past year expenses - what do you think?
 
SCENARIO:
1. Company year end 30 Nov 2020
2. VAT registered from 01 Jan 2021
3. Jan 2020 - Nov 2020 and December 2020 expenses posted originally as out of scope of VAT
    e.g. 1/Nov/20 DR Stationery £12 gross incl. VAT and CR Bank £12
    and 1/Dec/20 DR Stationery £24 gross incl. VAT and CR Bank £24
 
4. Journal entry for December expenses with CR for each of the affected nominal accounts and 1x DR for Purchase VAT a/c
    e.g. 1/Feb/21 CR Stationery £4 and DR Purchases VAT £4
 
OPTION thoughts:
A. past year Jan-Nov expenses journal entry also CR each affected nominal accounts, and affect current year P&L
    i.e. 1/Feb/21 CR Stationery £2 and DR Purchases VAT £2, noting that Stationery is a 2020-21 Revenue expenses account
or
B. 2nd Journal entry instead posts 1x CR to a dedicated balance sheet account, like Prepayments/Accruals
    i.e. 1/Feb/21 CR Pre-registration VAT adjustments account 2019-20 £2 and DR Purchases VAT £2
 
what my head can't get straight is "this is not a liability, and a strange asset with only a CR posting" so where in the Chart of Accounts does it go?



Edited at 04 Feb 2021 05:26 PM GMT

  • Member PM.Dip
  • Practice Licence
  • 13 posts
  • # 119476

Hi Alistair,

I am struggling to understand your scenario.  Which years do point 1 and 2 relate to?


Mark


  • 6 posts
  • # 119478

Thanks banjo_mark for seeking clarification ... does my expanded original post make it clearer?

Regards,

Alistair 

  • Member PM.Dip
  • Practice Licence
  • 13 posts
  • # 119481

Hi Alistair,


Yes, I have the timeline now. In my opinion, you are right to have posted gross expenses, ignoring the VAT up to and including 31.12.20. Thereafter you need to post nett of VAT. 

Why are you wanting to create Journal entries?

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