VAT Reconciliation Tutorials

The VAT Reconciliation calculates the VAT amount that is payable or refundable based on the invoice-based model. It also supplies all the totals needed to complete a VAT return.

It is also a summary of the VAT Control account, which is debited and credited by transactions such as customer and supplier invoices and expenses.

The VAT payment or refund as calculated by the VAT Reconciliation should result in a zero balance on the VAT Control account after the payment or refund is recorded (excluding timing differences).

💡These tutorials explain how to perform a VAT Reconciliation for an organisation that has both WHT and VAT enabled. If you only have VAT enabled, certain steps (such as choosing a type after clicking New) might not apply.

How to Create a VAT Reconciliation#

1. Navigate to the Tax or VAT Reconciliation entry on your menu (e.g. Main Menu > Accounting > Tax Reconciliation).
2. Click New (button) > VAT.
3. Fill in the fields:
   1. Entity = Select a registered entity from the dropdown list (applies only if you created more than one registered entity).
   2. Start = Enter the start date. Needed only the first time; after that, the date is set automatically.
   3. End = Set automatically from the VAT period. Change it if needed.
4. Click Transactions (button, next to Add) to open a list of transactions.
   1. Check the boxes as needed:
      • Zero-VAT: Includes transactions on which VAT was not claimed or charged.
      • Out-of-period: Includes transactions that were not included on a VAT reconciliation yet but are dated before the selected period.
   2. Click View (button).
      • Note: You can add or remove columns with Field Chooser (*), and save the layout from the Menu button.
   3. Check the box next to Status to select all the transactions, or click individual transactions to add only some.
   4. Click Add (button).
5. Check the transactions:
   • To open a transaction, right-click it and select Open Ledger.
   • To remove a transaction, right-click it and select Remove Transaction. To remove several, check them and click Remove (button).
6. Click Done (button) to finalise the reconciliation.
   • Note: If no transactions are added, the warning “No transactions have been added to this Reconciliation. Continue?” appears. If you click Yes (button), the reconciliation is completed without transactions.
7. Click Output (button) and select a report to print (if templates are added).

How to Understand the On-screen Totals#

1. Out of Period
   • This column includes transactions that pre-date the VAT Reconciliation start date but that were not previously included in a VAT Reconciliation.
   • If you do not have to declare these amounts separately, you can ignore this column.
   • The amounts are included in the Total.
   • If you must declare these amounts separately, deduct them from your Total. Otherwise, you declare or claim the amounts twice.
2. Total
   • The Output amount is the total VAT that was charged to your customers (whether they have paid the invoices) and must be paid over to your tax authorities.
   • The gross amount can be calculated as follows: Output Amount x (100 + VAT Rate) / VAT Rate.
   • The VAT-exclusive total is calculated by deducting the Output VAT from the gross amount. If all your sales include VAT at the standard rate, the VAT-exclusive total should equal your total sales for that period.
   • The Input amount is the total of all the input VAT claimed on the transactions. If various categories of Input must be disclosed separately, you must create a VAT Type for each category. Categories that often need their own VAT Types:
     • Bad debts
     • Imports
     • Capital goods
3. Balance Due
   • This balance is calculated by deducting the Input from the Output.
   • If the Output exceeds the Input, the balance is the amount you must pay over to your tax authorities.
   • If the Input exceeds the Output, the balance is the amount you must claim back from your tax authorities. This balance appears as a negative amount, in red.
     • Inputs should exceed Outputs only if:
       • You increased the amount of stock on hand.
       • You had to pay customs VAT on imported goods.
       • You purchased assets (e.g. new equipment) that you are allowed to claim the VAT back on.
       • You traded at a loss during the VAT reporting period.
       • You had a large amount of zero-rated sales against which you are allowed to claim inputs.
4. Transactions
   • Lists the net impact on VAT per Transaction Type.
   • Transaction Types without transactions that include VAT are not listed.
5. VAT Types
   • Shows the input per VAT Type so that you can split the input claim between categories such as capital and standard goods.

How to Edit a Completed Transaction#

1. Open a VAT Reconciliation.
2. Right-click the transaction you want to edit and select Open Ledger.
   • Note: The transaction opens in the right panel.
3. In the right panel:
   1. If the transaction’s status does not allow editing, change it to an editable status and click OK (button) on the warning.
   2. Edit the transaction as needed.
   3. Click Done (button) or change the transaction’s status back to complete and click Save (button).
4. Click Refresh (button) on the reconciliation to show the changes.
5. Complete the VAT reconciliation as needed.