Recording open invoices – Customers

This page explains how to correctly record accounting transactions using the VAT cash basis method, both during the year and at year-end, using Banana Accounting.

It is a practical guide, following the introductory page on VAT on a cash basis, and is intended for VAT taxpayers who apply this method (with prior authorization from the relevant office).

This page describes only the operational entries and does not replace the introductory page on the principles of VAT on a cash basis.

Transactions during the year with VAT on a cash basis

With the VAT cash method, during the year VAT is determined only at the time of receipt or payment. For this reason, customers are not managed as open items during the year.

In practice:

• revenues are recorded when the customer pays
• the VAT code must be entered on the same line as the revenue

The example below shows a possible entry in Banana Accounting for a payment received with VAT on a cash basis.

A bank account receives payment of an invoice from customer Bianchi for CHF 3,500.

The entry is made as follows:

• Debit: bank account
• Credit: revenue account
• VAT Code: VAT code (e.g. V81)

In this way, VAT is recorded only on the amount actually received.

 

Why additional transactions are needed at year-end

Even if the cash principle is applied during the year, at the end of the fiscal year it is necessary to determine the actual financial result of the year.

For this reason, as of 31.12, invoices issued but not yet collected must be recorded, so that revenues are attributed to the correct fiscal year, without anticipating VAT.

Accounts needed for open customer invoices

To correctly record open customer invoices at year-end, certain specific accounts must be created in the Accounts table.

Balance sheet accounts

• Customers on open invoices (Assets)
• VAT on open customer invoices (Liabilities)

Profit and loss accounts

• Revenues on open customer invoices

These accounts allow you to separately record:

• the revenue attributable to the year
• the VAT, which will only be recorded in the following year

Recording open customer invoices as of 31.12

At year-end, invoices issued to customers but not yet collected must be recorded as follows:

Accounting transation

1. First row

• Credit: Revenues on open customer invoices
• Amount: net amount (excluding VAT)
• VAT Code: empty

   2.  Second row

• Credit: VAT on open customer invoices
• Amount: VAT amount
• VAT Code: empty

  3.  Third row

• Debit: Customers on open invoices
• Amount: gross amount (including VAT)
• VAT Code: empty

No VAT code should be entered in these transactions, because VAT is not yet due.

Closing open customer invoices in the new year

At the beginning of the new year (01.01), year-end transactions must be reversed to allow normal recording of incoming payments.

Reversal transaction

1. First row

• Debit: Revenues on open customer invoices
• Amount: net amount (excluding VAT)
• VAT Code: empty.

   2.  Second row

• Debit: VAT on open customer invoices
• Amount: VAT amount.

   3.  Third row

• Credit: Customers on open invoices
• Amount: gross amount (including VAT).

When the customer makes the payment:

• the receipt is recorded as usual
• VAT is recorded in the VAT return of the period in which the payment occurs