Please can I get some help on the correct way to enter journals for the VAT treatment on invoices which have been written off as bad debts… I’m getting more and more confused the more I look at this!
I’m on the Fixed Rate VAT scheme, so I normally have no entries in nominal 2201 (purchase tax control account).
I’ve done some bad debt write offs using the built in feature within Quickfile. Doing the write-offs has created some debits for the VAT element on nominal 2201 (Purchase tax control account).
When I created my VAT return, I made adjustments by the relevant amount. Looking at the journals relating to the vat return, this created a credit to 2204 (manual adjustments) for the reduced vat. I have therefore created a journal entry to credit 2201 and debit 2204, and this looks good to me as it has cleared the balance in the purchase tax control account and the manual adjustments nominals.
However I still have a balance in the sales tax control account (nominal 2200) for the vat originally due on those invoices, which is showing on my balance sheet as a liability, and I can’t work out how that should be cleared.
Thanks in advance!