Throughout the world, in various VAT jurisdictions, VAT may be recognized at a different point in the transaction life cycle. For example, in one jurisdiction, it may be recognized upon receipt of the goods / services, yet in another jurisdiction, it may be recognized only upon the Invoice Date. Rootstock allows a user to set the recognition option in System Defaults. Options are:
Upon Delivery - VAT liability is recognized upon PO Receipt
Upon Invoice - VAT liability is recognized upon PO-AP Match
Upon Payment - VAT liability is recognized upon Vendor Payment
Prerequisites
Where VAT recognition is either Upon Invoice or Upon Payment, the appropriate GL Account needs to be assigned to the VAT Clearing Account in the Value Added Tax (VAT) Class program.
Upon Delivery
VAT liability is recognized upon PO Receipt
Upon Purchase Order Receipt the following entries are processed:
Dr Inventory / Expense 100
Dr Input VAT 10
Cr Accrued Payables 110
Upon Invoice
VAT liability is recognized upon PO-AP Match
Upon Purchase Order Receipt, the VAT Amount is posted to a temporary account and then posted to the correct VAT GL Account (for inclusion in VAT reporting) when invoice is posted.
The temporary account can be mapped to the appropriate user defined GL Account.
Upon Purchase Order Receipt the following entries are processed:
Dr Inventory / Expense 100
Dr temporary account 10
Cr Accrued Payables 110
Upon PO - AP Match, the following entries are processed:
Dr Accrued Payables 110
Cr Accounts Payable 110
Dr Input VAT 10
Cr Temporary Account 10
The temporary account can be mapped to the Accrued Payables GL Account should a user wish to offset the temporary value from the Accrued Payables balances resulting in the following net effect:
Upon Receipt:
Dr Inventory Expenses 100
Cr Accrued Payables 100
Upon Invoice:
Dr Accrued Payables 100
Dr Input VAT 10
Cr Accounts Payable 110
Upon Payment
VAT liability is recognized upon Vendor Payment
Upon Purchase Order Receipt, the VAT Amount is posted to a temporary account and then posted to the correct VAT GL Account (for inclusion in VAT reporting) when the actual payment of the invoice is posted.
NOTE The temporary account is not used in any VAT Reporting or VAT statements and only used as a temporary (clearing) account.
