FRS and Year End Accounts


To prepare year end accounts for a business registered for FRS we need to use gross amounts for turnover and then include the flat rate VAT due as a deduction from the turnover figure. Alternatively the Flat rate VAT can be shown as a separate expense item within the Profit and Loss account.

I was wondering how Quickfile users deal with the above?

Many thanks

If you’re filing VAT returns in QF then an adjustment is automatically made each time you file a return to correct the difference between the standard rate of VAT vs the flat rate VAT.

It’s explained here, but that should keep your P&L and balance sheet accurate.

Hi Glenn,

But for the year end sales should be gross and FRS VAT either deducted off this amount or shown as an expense.

With the adjustments I mentioned the P&L would be correct. VAT is a balance sheet item, it doesn’t appear on the P&L as an expense.

Let’s say an invoice is raised for £120 inc VAT:

£100 - on the P&L as NET sales.
£20 - on the balance sheet as output tax

Now the VAT Return is prepared, lets assume the FRS rate is 10%.

So 10% of £120 is paid to HMRC (£12), an adjustment is then applied by way of a journal to the original entries giving you:

£108 - on the P&L as NET sales.
£12 - on the balance sheet as output tax

So at the year end your P&L is NET of VAT and an accurate reflection of your sales total.

Hope that makes sense!

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