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Single entry book keeping on MTD software

Is single entry book keeping allowed on MTD software? I.e. on Sage, all entries posted as BP/BR?

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I have just taken over a client from another book keeper, who has been using Sage to be MTD complient, but is entering all payments/receipts as Bank Payments/Receipts, with no Customers/Suppliers set up. The business runs under cash based VAT, so all entries are made under the payment date, not the tax point. Is this ok? The business owner feels very strongly that it should continue as such, as he likes a Monthly report of the P&L to reconcile with his bank statement. I am not comfortable with ignoring the tax points on the invoices as such, although as he is operating under Cash based VAT I can see there is potentially no material impact?? But I don't want it to be an issue if there is an inspection of the accounts. Any advice appreciated, thank you, they haven't had an inspection since using pen and paper system.

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By garystirling
13th Jun 2020 13:16

This is extremely normal, I'm confused as to why you would question it at all? It's not breaking the rules of MTD.

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Replying to garystirling:
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By Ben McLintock
13th Jun 2020 13:36

And it's not single entry.

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Hallerud at Easter
By DJKL
13th Jun 2020 13:36

It is , by the way, not single entry accounting, it is double entry accounting on a cash/bank basis.

If a limited company do be aware that for reporting purposes at year end you ought to be adjusting from cash basis to accruals- introducing debtors and creditors etc.

Simplicity is great but imho there likely is an information void if management accounts are being used to steer business direction.

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By Matrix
13th Jun 2020 13:49

Isn’t this what most cloud software does and HMRC is encouraging Dave the plumber to do just this?

Admittedly you are meant to raise the invoice first but you don’t have to. You end up with reconciled books but adjustments may be required at year end to get to an accruals basis.

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Replying to Matrix:
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By Cloudcounter
13th Jun 2020 16:13

No it isn't what most cloud software does. You can always run the software on a cash basis if you choose but all of those that I've looked at will operate on an accruals basis with sales and purchase ledgers.

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By Matrix
13th Jun 2020 16:18

But you don’t need to use them, you can book a sales receipt directly to sales from the bank account. I mean that they have a bank feed which may appear as if the owner is making single entries.

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By Cheshire
13th Jun 2020 14:00

Why do you think this is single entry bookkeeping?

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By Montysmum1
13th Jun 2020 14:24

Ok, maybe I haven't explained it very well or am confused myself.

I have referred to it as single entry as all invoices are being recorded in the detail of the Bank payment/receipt line, so only a 'Single entry' and not against a customer/supplier's account, then the supplier payment/customer receipt allocated against it. Yes, a lot simpler than having suppliers/customers as well as the bank balance immediately reconciles to the entries that month, although cumbersome if for example you want to know how much has been spent with one supplier etc as you have to go through and manually search/add them up. Not incorrect, I appreciate that.
My concern is that rather than using the function within sage to run the VAT on a cash basis, the entries are dated as per the payment dates, and not the tax points on the invoices, which generates the same result, all the payments/receipts appear on the correct VAT return for the period. Is that ok?
I do not usually do it this way, so am just checking it's not going to cause problems.

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Replying to Montysmum1:
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By Truthsayer
13th Jun 2020 14:40

'maybe I haven't explained it very well'

Definitely you haven't explained it very well, and your next paragraph does not improve that. What are the double entries you are making? For example, if you receive £120.00 to settle an invoice for £100 plus VAT, exactly what entry do you make?

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Replying to Truthsayer:
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By Montysmum1
13th Jun 2020 16:11

If £120 is received in the bank, there is no sales invoice posted on Sage, just a bank receipt for £120 which would be recorded as T1 to account for the VAT, and the name of the company/individual will be entered in the 'details' field.

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Replying to Montysmum1:
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By Truthsayer
13th Jun 2020 16:40

I give up. You still haven't said what double entry you are making. You have only talked about the bank entries, and said nothing about where the other side of the entries are going.

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Replying to Truthsayer:
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By Montysmum1
13th Jun 2020 16:42

There are no other entries. Just bank payments/ bank receipts. That's my point.

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By Cheshire
13th Jun 2020 16:46

Oh dear!

Of course there are.

What would be your normal double entry for this, if it was on the back of a fag packet?

Then go and check the TB, key one entry, then check your TB again, where does it show up?

Have you done any bookkeeping training at all? Or relying on 'experience'?

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By thevaliant
14th Jun 2020 10:12

There is double entry in operation, but in fairness to the OP, it does 'look' like single entry bookeeping on Sage. When you post bank receipts or payments, it is posted as one entry and on the transaction report it reports as one line (rather than two for DR and CR transactions).

But that's Sage for you. It tries to simplify matters for non-accountants.

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Replying to thevaliant:
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By Cheshire
14th Jun 2020 11:06

Agreed, had she been the farmers wife, but she states this is another client ergo she is a bookkeeper. Clearly knows some basics but it's not just about knowing how to dump figures into software if you are charging clients. Besides, it's not just sage that do that.

She should have a chat with the Accountant to see if they can tackle the client together, or just walk if she is unhappy, as I suggested.

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Replying to Montysmum1:
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By Truthsayer
13th Jun 2020 16:52

You do understand that your ARE making double entries, don't you? Sage won't let you make a 'single entry'. The fact that you are using one screen doesn't mean you're not making a double entry! Do you actually know anything about book-keeping at all?

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Replying to Montysmum1:
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By Cheshire
13th Jun 2020 15:56

What kind of trade? Who is doing year end (per the points above)? Does he want to know about his spend with suppliers etc? How does he monitor what is o/s?

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Replying to Cheshire:
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By Montysmum1
13th Jun 2020 16:14

Farming. The accountant does the year end. Yes he does require further break down of spend with suppliers/per crop but expects this to be done manually from print outs of transactions entered as bank payments/receipts. He currently monitors outstanding amounts by the pile on his desk.

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By Cheshire
13th Jun 2020 16:51

I was going to suggest that you show him how he can get his information out of sage (on a crop by crop basis), whilst ensuring he doesn't miss being paid etc and probably keeping his year end Accountants bill down, but to be honest if you haven't much experience that could prove difficult and he will not really care, as he clearly just wants his vat compliance sorted.

Unless you can get the Accountant involved.

Perhaps you should just tell him the job isn't for you

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Replying to Montysmum1:
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By Ben McLintock
13th Jun 2020 18:04

Montysmum1 wrote:

Yes, a lot simpler than having suppliers/customers

Your opinion perhaps, but I'd rather maintain ledgers and see at a glance from my accounts system who I'm due money from and which bills are still to be paid, rather than having to have maintain some additional means of keeping track out with the accounting system.

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Replying to Ben McLintock:
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By Montysmum1
13th Jun 2020 16:35

Not my opinion at all, I was acknowledging another person's reply. I do not use this method myself, which is why I am querying it. I usually use customer/supplier ledgers for the same reasons as you. This is a new client, and I am being instructed to work in this manner. I am querying it because I can see massive flaws in it and am trying to understand why they prefer it and if it causes problems with HMRC compliance.

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Replying to Montysmum1:
Hallerud at Easter
By DJKL
13th Jun 2020 18:17

If a decent sized farm might be better considering say moving to something like Landmark or another system designed for farming. Not cheap, doubt it is simple to use (I use the property part which takes a bit of effort to follow set up), but a lot of reporting potential.

https://www.landmarksystems.co.uk/

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Replying to Montysmum1:
By johngroganjga
15th Jun 2020 08:18

I am not sure why you see the "flaws" as "massive".

Plainly it make things easier with VAT for an entity that is dealing with VAT on the cash basis, as you say your client is. So that advantage needs to be offset against the drawbacks.

The principal drawback is the need to ascertain the unpaid sales and purchase/expense invoices each time accounts are to be prepared. How big an issue that is will depend on how many such invoices there typically are at any point in time, and what system the client has for keeping track of them.

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By johngroganjga
13th Jun 2020 19:50

Perhaps I can help with terminology. What is being described here is not a “single entry system”. It’s a “ledgerless system”.

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By Matrix
13th Jun 2020 23:47

Dr Bank 120
Cr Sales 100
Cr Output VAT 20

I don’t know Sage but I assume you are making the credit entries when you code the transaction? Or it would show up on the bank rec.

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By paulwakefield1
15th Jun 2020 08:51

I thought the OP's questions and answers were perfectly clear but it would perhaps have been more helpful if the term "single posting" had been used instead of "single entry" in respect of a completed transaction.

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By petersaxton
24th Jul 2020 16:48

Double entry means there are debits and credits.
It doesnt necessarily mean you use sales ledger or purchase ledger.
If you dont record the sales invoice at the time of sale then you are not accounting for VAT properly.
Why does the owner think it is better? How does he keep track of what he is owed?

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