Setting up VAT accounts

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What are VAT accounts?

The VAT accounts are accounting sheets where the VAT amounts are automatically posted, based on the VAT code settings in the VAT Codes table.

When a VAT code is used, the program automatically calculates the following data based on the values of the transaction:

  • Taxable amount and the VAT amount.
  • Taxable amount on the Debit account.
  • Amount of the taxable amount on the credit account.
  • Amount of the taxable amount on the credit account.

At the bottom of the information window, by moving the mouse over the transaction, you can see which amounts are recorded on the different accounts.

General VAT account (automatic)

If the VAT account is set as default in the File → Properties file → VAT, this is used whenever there is a registration with a VAT code. In this case, the VAT accounts for the various VAT codes must not be set up in the VAT Codes table.

Recoverable and Due VAT Accounts

In the VAT code table, VAT Account column, according to the VAT code (active or passive) you can indicate the recoverable VAT account or the VAT due account. In this case, if these specific accounts are set up in the VAT Codes table, the default VAT account (General VAT account - automatic) must not be set in the File Properties, VAT section.

Using a single VAT account or several VAT accounts?

In accounting, the active part must be separated from the passive part. If the recoverable VAT is offset against that due, only the VAT amount actually due must be shown in the balance sheet.
From an accounting point of view, in most cases, it is not essential, indeed it is better to have only one VAT account.
For reporting purposes, however, it is useful to have the different types of separate VAT transactions. In programs that do not use VAT codes it is necessary to separate each operation on separate accounts. With Banana Accounting, thanks to the VAT codes and the VAT Summary, it is possible to obtain much more meaningful details while also using a single VAT account:

  • Movements and totals (taxable VAT, VAT amount, accounted VAT) for each VAT code.
  • Movements and totals by VAT percentage.
  • Movements and totals by VAT account.
  • Movements and totals by amount due and recoverable.

In order to control VAT transactions, it is not necessary to use several separate VAT accounts.

Banana Accounting leaves the choice of using the general account, set up in the File Properties, or different VAT accounts, set up in the VAT Codes table.

Advantages of using a single VAT account

After several years we have seen that the use of a single VAT account is much more intuitive and, for the Swiss charts of accounts we have therefore chosen to use a single VAT account (2201, VAT statement), obviously leaving the possibility to each change the settings.

  • Balance sheet and income statement much easier to read (there are not many VAT accounts).
  • Possibility of having accounts (for example of revenues) in which to register transactions with different VAT rates.
  • You know immediately the VAT due without having to add several accounts together.
  • Immediate display of all VAT transactions.
    In the VAT account card, all the VAT transactions in Debit and Credit are indicated.

automatic VAT account

Advantages of using multiple VAT accounts

If you use VAT codes, the registration on a specific VAT account is a repetition of information that you already have with the VAT code and its detailed summary.

In countries like Germany it is customary to have a different VAT account for each type of transaction, so that the VAT return can be made using the balances of the individual VAT account cards.

In these cases, for compatibility with this system, it is useful to have different VAT accounts for each VAT code.

Closing of VAT accounts at the end of the period

At the end of the VAT calculation period, it is useful to close the debit and credit VAT accounts and move the balance to one account. This allows:

  • Accounting for the exact amount due to be paid or recovered
  • At each new period, the account "2201, VAT return" starts from scratch, making it easier to check for any differences and errors.

For the periodic closure of the account "2201, VAT statement", see the Periodic closure and VAT payment page.


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