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Entries for Bad Debt - VAT Cash Accounting

Bad Debt Write off - VAT Cash Accounting

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Hi, Im having a bit of brain fade and would just like to check if I am correct!

Client who is on the VAT Cash accounting scheme - Made sale to customer and it is now certain they are not going to get paid.

I am aware that no VAT adjustment is required, however, am I correct in thinking these are my entries:

Dr Bad Debt Write off (P&L) - with the NET sale

    Cr Trade Debtors  with the NET sale? - but the Debtors includes the Gross figure??

Or am I just having a head-mash day??? 

Thanks

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RLI
By lionofludesch
23rd Jan 2020 11:57

Depends how your software deals with it.

Probably easiest to deal with it as though it were a credit note. Post the net of VAT debit to "Bad Debts" instead of "Sales".

There shouldn't be any comeback from HMRC as you've never paid the VAT in the first place so there's no claim to be made.

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By Matrix
23rd Jan 2020 12:15

The other debit would go to Deferred VAT usually.

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By bettybobbymeggie
23rd Jan 2020 14:36

If, as you say, debtors includes the VAT, then you will need to look where your system posted the credit side of the original posting...probably the net to sales and the VAT to a control account.

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