How to account for a first VAT return in FreeAgent?

Hi James,

With apologies for the delay in answering this.

So for example, you had an accountant's bill for #575 (500 + VAT) that you entered into your previous system and haven't yet claimed the VAT on? And at the moment, if you were to look in the Accountancy column/account in your previous system, you'd see a figure of 575?

You've already put that figure in as Accountancy so you don't want it in again in FreeAgent. What I'd probably suggest you do, is to do journal entries to claim the VAT.

You need to do two journal entries for the VAT on each item (goods or services) that you want to claim the VAT on. Make sure one entry, the debit (which you enter as a plus) goes to code 818 VAT Reclaimed, and the other entry, the credit (entered as a minus) goes to wherever you initially put the goods or services. And you'll need to make sure the entries are both for the same amount for each pair of entries, and on the same date.

Argh, that was accountantese :-) Let me take you through a worked example, using the #575 accountancy bill above. The amount to post is the VAT only - so #75. (Sorry, I'm on an American keyboard with no pound sign.)

Go to Accounting > Journal Entries.

Click New Journal Entry (green button to the right of the screen).

For the first entry, choose code 818 VAT Reclaimed from the drop-down list.

Put the date as the last date of the VAT quarter (e.g. if you're claiming this VAT in the quarter ended 31st October 2009, date the entry 31-10-2009).

Enter the amount, 75.00, as a plus (you don't need to put in the plus sign).

Put as the description something like "VAT claimed on pre-registration accountancy bill".

Click Create and Add Another.

Then for the second journal entry, choose code 292 Accountancy Fees, and give the entry the same date.

Put the amount in as -75.00. It's very important that for this one you put in the minus sign.

Put in the same description.

Click Create New Entry.

You'll need to do that - two journal entries, the plus to 818, the minus to whatever the goods or services were for - for each invoice that you want to reclaim the VAT on.

I hope that helps but please don't hesitate to ask if you get stuck.

Kind regards,

Emily