Can anyone advise how they are handling VAT, especially reverse charge? I’ve created accounts in the liabilities section for the different rates 20%, 0% & Exempt as my theory was that I could try and analyse the information that way in order to be able to generate relevant information to enable a VAT return to be completed however I’m not sure this will work.
I don’t even know if erpnext could handle a tax refund (ie where input tax exceeds output tax) correctly ie show it in the assets and not liabilities. I think of this type of account as floating ie what section of the balance sheet it appears on is dependent on the type of balance held on the account much like a bank account which can either be in credit or overdrawn meaning it too can be either an asset or liability depending on the type of balance it holds.
How I will get reports that will give me the information that I require for filling in all 8 boxes of the return (excluding box 5 which is simply a calculation box) is currently not obvious to me.
Any experience of those who have implemented VAT and have made it work would be appreciated?
@eamonn you might have to make custom reports based on your requirements.
Based on your nature of business VAT it would be usually one of asset or liability and. You can choose the parent account but ERPNext does not support floating accounts.
Yeah I thought I would I have to go about customising this. I haven’t looked at reporting at all yet. Was hoping someone had trodden the path before me and could offer advice on the way to set it all up and generate the necessary reports. I’ll dig around and see what I can manage to do.
As regards floating accounts does this apply to bank accounts also ie would an overdrawn bank account be shown in the Current Assets section of the Balance Sheet but with a minus balance thus reducing the current asset value and underestimating current liabilities?
@eamonn As long as you have the correct balances, its just a matter of dressing up your balance sheet. You can change the parent account anytime to suit your needs.
If you think there is a better way to do it, do let us know.
@rmehta Is there a reason that no account numbering was used in order to provide a basis for structuring the coa? I think this is likely to hamper the usefulness of the accounting package.
Essentially here in Ghana, we also use the same VAT system as the UK. What I’ve done is create one liability account under the group taxes and liabilities, and have set up both input and output VAT to hit that account. So at the end of the reporting period, the residual balance on the account becomes my liability to the gov or asset to be carried over.
So all input VAT hit the debit of that one account, and all output VAT hit the credit of that same account. I notice it makes things quite easy and manageable
@eamonn you like numbers because you are used to them
For most new users of accounting, numbers are an additional thing to remember. You can rename your accounts with numbers though.
@sinaisix Thank you. That seems a lot handier. I had considered one account however I was then worried that I wouldn’t be able to pick up all the information for all the different boxes I have to complete on VAT return. If the tax and charges template that is used in the purchase or sale is held in the purchase or sale record then I should be able to identify what type of tax transaction it was ie was it zero rated VAT, standad rated VAT, reverse charge VAT on standard rate, reverse charge on zero rated VAT, etc. If it doesn’t then the only way I can think of doing this is to push those to separate accounts that way I can pick up the relevant info there.
@rmehta You are right it is because I’m used to that however I think the reason why it is always like that in every accounting package I have ever used, and I’ve used a few, is that it provides structure. Fine grained structuring is important simply because Accounting Standards require it.
I don’t actually get your argument about numbers being an additional thing to remember as it assumes that names are easier to remember than numbers. I can tell from many years experience remembering structures by numbers is much easier than by name simply because names can be ambiguous, numbers are not.
I’ll give you an example. My current accounting package is Sage. It structures around numbers. I can tell you immediately that if I’m looking to find the account where I put my PayPal fees I know immediately that all Overheads are in the range of 7000 - 8999. I also know that 79xx are all charges relating to bank accounts. So I quickly type 79 and up comes up all the accounts and I select 7909 for PayPal Fees. Very quick and efficient. My problem with names only is that I’d have to know the words used for the account before I could search for it or I’d have to leave what I’m doing and go look up the CoA. I might not even remember how I set up PayPal Fees so I could have said oh PayPal Fees that is a bank charge I’ll just put in 7901 or I could have said I’d really like to know what the PayPal fees are on their own so I’ll give it an account of its own. I’d have that ambiguity in my head so I’d immediately start saying oh I’ll try PayPal fees first which in this case was the right decision however it could have easily have been Bank Charges and Bank Charges could have called Bank Fees or Current Account Fees or Bank Name Fees.
Aside from that the fine grained structure is important because in Financial Statements all accounts have a specific order such as in order of liquidity in Current Assets. How do you do that with a name? It’s not possible without having to add a numbering or letter scheme to the start of the name and at the end of the day this is chief reason why it’s done this way.
So in essence I think putting a new user from a non Accounts related background over all other users of an accounting package who you would expect have some experience dealing with accounts is wrong headed. It will make your accounts offering look amateurish. But hey that’s just my opinion.
@eamonn the reason why numbers came to be used in the first place was probably because of space restrictions in creating column index for the primary key.
But yeah, you can easily rename as numbers if you like.
@rmehta How can you structure a chart of accounts to meet international and national accounting standards without numbers? If you can’t do that with names only then it’s a design flaw as accounts first and foremost must be compliant with relevant standards. If there is a need for numbers then the basic design should reflect that.
I’ll not pursue this point any further as I have made my arguments and they are not going to change and I suspect neither will yours.
As regards primary keys well I wouldn’t have used account code for that anyway as it would constrain the ability to change the structure to much.
I’m enjoying trying this software out. It’s been the easiest to work with so don’t take the above as too harsh a criticism overall.
Hi, I have to fill VAT forms every three month in NL and have no problem with that. If I buy in Germany I do not pay VAT there but have to report this to NL revenue authority. I apply both a positive and and a negative VAT for intra community purchases. So the VAT i pay is zero, but I can still track the amounts for reporting purposes
@becht_robert Hi brecht_robert that is great news. If you have any time if you could share your setup it would be a great help to myself as I’ve side stepped the issue for now as I had lots of other parts I could work on hoping that at some point inspiration would take over