VAT reconciliation

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When you have completed your VAT return you should journal the value of VAT in Sales and Purchases to the reconciliation account, this separates the immediate short term liability of VAT to be Paid from the longer term liability of VAT that will not be paid for another three or four months. It also provide a way to check that the correct amount has been paid to the VAT man.

In the illustration above you would Debit the sales tax control account (2200) by 14325.53 and Credit Vat Liability (2202) by the same amount. Credit the purchase tax control account (2201) by 4073.97 an Debit the VAT Liability (2202) by the same amount. Note: The more recent versions of Line 50 now include an option to save all the details your vat return printouts in achieves, so there is no reason to have to print out a forest worth of paper to accompany each vat return any more.

Vat bank payments or bank receipts go against 2202 and should reset it's balance to 0.

The VAT control accounts now show only the accruing liability that will not be paid until the next VAT return.

To make this procedure easier, there is a wizard for it (in modules menu)