Help with Bad Debt provision and VAT in Sage

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We have a customer who has gone into administration and I need to make a provision for our year end.

I understand that I need to CR 1106 with the gross amount, DR 2202 with the VAT and DR 8102 with the net amount.

However, when I come to actually write off the debt what will the journal be? And I can't claim VAT relief for several months from now, which woould be a DR to 2201 but what is the other side of the journal?

Thanks

Drew

Replies (5)

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By Truthsayer
11th May 2022 12:35

What does your accountant say?

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By accountaholic
11th May 2022 13:25

Think about it, you've now got two debits in the VAT range so you'll need a credit somewhere in range 2200-2209 depending on how you have those codes set up. That way you have one VAT reclaim ending up in your next VAT return.

If you're writing it off permanently you'll surely also need to move the credit from the provision account 1106 to debtors control, probably 1100?

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By DKB-Sheffield
11th May 2022 13:46

Very difficult when you quote Nominal Codes. Many clients on Sage and, whilst 2202, and 2201 is fairly standard, 1106 and 8102 were not (always).

First... your provision...

Assuming 1106 is provision (debtor), and 8102 is provision (cost), your journal will see the items in the right area for accounting. As you have stated that you cannot yet reclaim the VAT, the entry must be Out Of Scope (T9) to ensure it isn't pickedup onthe next VAT Return.

Personally, I prefer to use a separate nominal for BDP VAT where there is/ was no entitlement to reclaim at year end. It also ensures the return values match the VAT Liab (2202).

After the year end (e.g. 01/05 for a 30/04 y/e) reverse the journal as you would usually. That puts your slate clean.

For the write-off, you will need to clear the AP/SL. There are numerous methods built into Sage. Whichever you do use, make sure the VAT is reported, and that it is reported in box 4. I'll not explain how I do it as I know I'm old-fashioned in that sense (having used Sage before many bells and whistles, and having had clients use the 'write off' function with some odd results).

Ultimately, your accountant has to prepare your accounts so, asking them how they want to see this on the TB would be the best way forward!

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By rmillaree
11th May 2022 17:54

I would always recomemnd following acocuntants specific advise - lets have a go though

Presuming invoice has been raised by far the easiest way here is to enter credit note with bad debt nominal used (rather than sales) and then go into payment screen and match o/s invoice and credit - payment value will be nil - job done and sage will automatically sort out the vat presuming no "time based" manual adjust was ever done - time for a hot toddy even perhaps

If the sale is not on the system then you could cut to the chase and debit bad debt credit sales by net value of invoice (not yet included) and (bad debt w/off)

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RLI
By lionofludesch
11th May 2022 18:22

Dr Bad Debts
Dr VAT Input (suspense for "a few months")
Cr Debtor.

In "a few months"
Dr VAT Input account
Cr VAT Input suspense

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