THIS QUESTION IS PROBABLY ADRESSED TO JOE from QUICK FILES
or any other accountant who can help.
First of all I am on Flat Rate Scheme for VAT.
Here are my vat periods:
1 VAT RETURN) 17/10/2013 - 30/11/2013
2 VAT RETURN) 01/12/2013 - 28/02/2014
3 VAT RETURN) 01/03/2014 - 31/05/2014
My problem is that I had invoices issued in March for £1000 (VAT £200) which created Credit in 2200 Sales Tax Control Account
But because the 3rd vat return period ends on 31/05/2014 no Flat Rate VAT Sales Adjustment has been made for March month.
In another accouunting software (FreeAgent for example) in exact same situation Flat Rate VAT Sales Adjustment adds so that Flat Rate VAT Sales Adjustment = £244 and not £122 as in Quick File case
also it records £78 in Liabilities accounts as VAT Charged (but not paid yet in this financial year)
How do I handle this in Quick File?
I belive I would need to make a journal to come up to Flat Rate VAT Sales Adjustment = £244
An example of such journal would be nice.
I think I can simply solve this by splitting the VAT JOURNAL that QUICK FILE creates automatically with 3rd VAT RETURN period end date (to make FRS VAT ATJUSTMENT) into 2 JOURNALS so that 1 Journal will have 31/05/2014 and have amounts for APRIL AND MAY 2014 and 2 Journal will have a date 31/03/2014 with required amounts for MARCH month.
Just a hint for QUICKFILE DEVELOPERS for the future - this is something that Quick File should do automatically but it doesn’t, hence this will be required for me to make manually.
This basically solves the problem and creates Vat Liability for MARCH (£78 in my case) in the first financial year.
I don’t see why you need to adjust it at all? If you leave it as is, it will get included in the next financial year anyway. The adjustment is only actualised when your VAT return is calculated, if you start journalling it now you’ll only have to journal it back out again when you submit your VAT return later.
Other systems may handle the interim liability for FRS different, that’s fine as long as the method is consistent from year to year it won’t be a problem.
Yes but if I won’t adjust it, the Gross Profit will be £124 less (and the net profit and Corporation tax will be lower as well) but in the same time I also will have a £200 liability (Sales Tax Control Account) in the balance sheet.
Of course it will get sorted in the next year but I wasn’t sure that this is correct way for accounting because other accounting software actually account for Flat Rate VAT Sales Adjustment on the day to day basis rather than on a VAT period end basis.
But if you say so, I suppose it is fine.
It is possible some accounting systems handle this differently, I know QF is not the only system that works by applying end of period adjustments, to my knowledge Kashflow and Xero work in exactly the same way. The important thing is whatever method you use you stick to it. These are small amounts and not something that I would personally worry about. If you have any doubts I would suggest running this by your accountant. If you want to journal the interim balance that’s fine, just remember to adjust back later.
