Hi. I credited a credit note previously which was entered as a credit note for a refund. It was then reconciled through a VAT return. I have recently gone to reconcile the bank and realised that the credit note should have been issued against an invoice instead of a refund. I detagged the refund in the bank account, not realising that this would completely erase the credit note. I have now created a new credit note to set against the invoice. This new credit note appears in the latest VAT return as expected however I cannot see a reversal of the original credit note (theoretically they should cancel each other out to a net effect of 0 as essentially nothing has changed). Can someone please explain how the removed credit note has been treated?
Theoretically, if the accounting entries originally were Cr Cost of sales, Cr VAT, Dr Bank, then the reversal should result in Dr Cost of sales, Dr VAT, Cr Bank. Obviously the Cr Bank has occurred by removing the refund but I can’t see where the Drs have gone.
I know I can just adjust the VAT return box values to remove the value of the new credit note but it means I can’t be sure that the P&L is correct.
I just tried this on my own account (with a purchase credit rather than a sales credit but the principle should be the same) and deleting the refund bank transaction didn’t delete the credit note, it just left it as a prepayment on the supplier’s account (which could then be used to pay down other invoices).
You can check if it did the same for you by going to the relevant client’s summary page, view all payments, and advanced search for type “unallocated”. If you do indeed have an unallocated payment from the original credit note then you can delete the extra credit note you created and everything should balance.
In nominal ledger terms, when you do a refund credit note it isn’t simply “Dr Cost of sales, Dr VAT, Cr Bank”, there’s two sets of entries - Dr Cost of sales, Dr VAT, Cr Debtors Control (for the credit note itself) and then Dr Debtors Control and Cr Bank (for the repayment transaction). When you delete the bank transaction it’s only the latter pair that you’re deleting, the credit is still there with the contra entry in the control account.
Thanks for your response.
It was a purchase credit note that the issue is with. I am aware that there is a second journal where it hits the creditors account however as the credit note is not saved in Quickfile until refund has also been included it kind of misses out hitting the creditors account.
Unfortunately it appears that the credit note in question has not been treated as yours did. The removal or detagging of it from the bank transaction completely removed the credit note, it is not showing in the purchases list, in the supplier purchases or as a prepayment as you suggested. It also does not appear to show up in the cost of sales nominal in the P&L. This is why I’m confused as to how its been treated as it’s obviously been removed from the system but I don’t know how this can be done without the VAT nominal also being adjusted for the removal.
Ah, I deleted the bank transaction entirely rather than de-tagging it - maybe that behaves differently. I’m afraid I’m at the limit of how I can help, given I don’t work for QuickFile - someone at @QFSupport may need to take a look at their back-end view of the database to work out what has happened.
