How Your Cash Accounting VAT Return is Calculated

The VAT Cash Accounting system calculates your VAT Return automatically using the following system: Output taxes are calculated from: Sales receipts and payments on account. Bank receipts. Journal credits. Cash receipts. Credit card receipts. Input taxes are calculated from Purchase payments and payments on account. Bank payments. Journal debits. Cash payments. Credit card payments. VAT Return Reconciliation Note: The procedure in this guide assumes that you are using the default tax codes and default nominal codes for the control accounts. If you are not, replace the codes given in this guide with your own. Reconciling your VAT return enables you to verify that all relevant transactions have appeared on the VAT return and sets a flag against transactions that have been included in the current VAT return so that you do not include them again in future. Although you only have to fill in your VAT return quarterly, we recommend that you follow the procedure monthly, simply because it’s easier to reconcile one month’s worth of transactions than three. The procedure is slightly different depending upon whether you are using the standard VAT scheme or the VAT Cash Accounting scheme. Follow the steps corresponding to the scheme you are using. Hire Purchase Agreements (Including Part Exchange) Your business will probably enter into a hire purchase agreement at some point, for example, when buying a company car or purchasing office equipment. This section describes the recommended procedure for recording a hire purchase agreement for the purchase of a car, including part exchange. Recording hire purchases consists of: Checking your Chart Of Accounts. Recording the disposal of the car being replaced and the initial hire purchase agreement. Setting up the monthly repayments (i.e. the interest payment and the loan repayment). You can record your hire purchase agreements in your Sage Line 50 program through a series of journal entries. Use the skeleton journal Sage Line 50 has created for you to record your transaction. To illustrate how to record your hire purchase agreements in Sage Line 50 we have used the example given below: Your company buys a new car for an on the road price of £8458.53 including VAT. Your bill also includes documentation fees of £50, an option fee of £25, as well as Road Tax at £150.You pay a deposit of £500 and receive a part exchange worth £1300 for your old vehicle. Your interest repayments work out at £1669.53 to be paid over four years. The vehicle you are part exchanging originally cost £4000 but has depreciated by £3000. Therefore the Net Book Value of the vehicle is £1000.