Overview of VAT Prepayment Functionality for Financial Management Systems

1. DA1236Prepayments DA1236 Prepayments Last updated: March-2004

2. Overview Overview of Prepayments With your system set up to use Prepayments functionality is provided that enables the VAT element of an advance payment (prepayment) to be recorded in a VAT specific General Ledger control account until the payment is matched and posted The mechanism for managing this functionality is clear and auditable Note that to use this functionality your system must also be set up to use European VAT (DA0370) DA1236 Prepayments Last updated: March-2004

3. General SupportingFiles DA1236 Prepayments Last updated: March-2004

4. Only non-revenue posting codes can be entered for the Prepayment control but it must be left blank if a Normal VAT code has been entered The Prepayment account (revenue/cost) posting code must be flagged as a revenue account if the Ledger code is set to R or a non-revenue code if the Ledger code is P – the VAT code defined against the posting codes must also match the current VAT code VAT Codes This option has been modified to allow prepayment control and prepayment revenue/cost posting codes to be defined Note that if these posting codes are not defined the VAT code cannot be used for prepayments DA1236 Prepayments Last updated: March-2004

5. PrepaymentProcessing DA1236 Prepayments Last updated: March-2004

6. Enter, as before, the Cash batch and batch control information, then the cash item Cash – Accounts Receivable This option has been modified to allow unallocated cash to be marked as a prepayment Note that this system is set up to use Multi-currency Receipts (DA0814) DA1236 Prepayments Last updated: March-2004

7. Enter the cash item details... …including any unallocated amount Then, to mark the Unallocated amount as a prepayment, select F13-Prepayment Cash – Accounts Receivable DA1236 Prepayments Last updated: March-2004

8. You can now define the Prepayment VAT code To view the calculated amounts and posting codes relating to the prepayment, select F8-Refresh – to accept the prepayment amounts, select CR-Confirm Cash – Accounts Receivable Note that only VAT codes that are set to Receivable (R) and have prepayment accounts are displayed in the browse for selection (see slide 4) Note that this functionality is NOT available for Accounts Receivable Refunds DA1236 Prepayments Last updated: March-2004

9. Cash – Accounts Receivable When the batch is posted, 3 prepayment accrual postings are generated in the appropriate General Ledger accounts and the VAT Register updated – the prepayment VAT protocol number is taken from the system key SLLASTVPR Note that prepayments can only be registered to a normal VAT Register – if the customer has a pending VAT Register, the VAT is updated to the associated normal VAT register instead The Prepayment Calculations can be viewed on slide 19 Cash postings and journal postings reverse the amounts when the prepayment item is matched and posted – partial matching is allowed DA1236 Prepayments Last updated: March-2004

10. The prepayment cash item can be matched against the invoice using a journal Journals – Accounts Receivable Reversing prepayment accrual postings are generated in the appropriate General Ledger accounts and the VAT Register updated when journal is posted DA1236 Prepayments Last updated: March-2004

11. The functionality works in the same way as for Accounts Receivable cash – you enter the Cash batch and batch control information, then the cash item, followed by the cash item details, including any unallocated amount Then, to mark the Unallocated amount as a prepayment, select F13-Prepayment Cash – Accounts Payable This option has also been modified to allow unallocated cash to be marked as a prepayment DA1236 Prepayments Last updated: March-2004

12. You can now define the Prepayment VAT code To view the calculated amounts and posting codes relating to the prepayment, select F8-Refresh – to accept the prepayment amounts, select CR-Confirm Cash – Accounts Payable Note that this time only VAT codes that are set to Payable (P) and have prepayment accounts are displayed in the browse for selection (see slide 4) DA1236 Prepayments Last updated: March-2004

13. Cash – Accounts Payable When the batch is posted, 3 prepayment accrual postings are generated in the appropriate General Ledger accounts and the VAT Register updated – the prepayment VAT protocol number is taken from the system key PLLASTVPR Note that prepayments can only be registered to a normal VAT Register – if the supplier has a pending VAT Register, the VAT is updated to the associated normal VAT register instead The Prepayment Calculations can be viewed on slide 19 Cash postings and journal postings reverse the amounts when the prepayment item is matched and posted – partial matching is allowed DA1236 Prepayments Last updated: March-2004

14. The third toggle screen (second toggle screen in Accounts Payable Transaction enquiry) of transaction details includes a prepayment indicator – posted items that have a corresponding prepayment record display a ‘P’ in this field Highlight the transaction then select the F12-More action to display the list of further options Transactions enquiry – Accounts Receivable This option has been enhanced to display the posted prepayment details DA1236 Prepayments Last updated: March-2004

15. The option Prepayments has been added to the list of options available – highlight this option then select CR-Select to display the prepayment information for the selected transaction Transactions enquiry – Accounts Receivable DA1236 Prepayments Last updated: March-2004

16. Transactions enquiry – Accounts Receivable The prepayment information for the selected transaction is displayed DA1236 Prepayments Last updated: March-2004

17. PrepaymentProcessing – Example DA1236 Prepayments Last updated: March-2004

18. Prepayment Calculations Prepayment Calculations The VAT amount is calculated from the gross amount entered as follows: VAT amount = (gross amount / (100+VAT Rate) * VAT Rate The VAT amount is then subject to the VAT rounding rules defined on the corresponding VAT Code record The nett amount is calculated as: Gross amount – VAT amount DA1236 Prepayments Last updated: March-2004

19. Accounts Receivable Cash Prepayment For an Accounts Receivable prepayment item value £117.50 with a VAT code V (17.5%) the prepayment postings are as follows: AccountsCRDR Prepayment Control 117.50 VAT Payable (V) 17.50 Prepayment Account 100.00 A VAT Register record reflecting the above figures is also created DA1236 Prepayments Last updated: March-2004

20. Accounts Receivable Cash Prepayment When the invoice or journal is matched to the prepayment cash item and posted the VAT register and General Ledger accruals are ‘reversed’: AccountsCRDR Prepayment Control 117.50 VAT Payable (V) 17.50 Prepayment Account 100.00 This example would be in reverse for Accounts Payable prepayments DA1236 Prepayments Last updated: March-2004

21. AuditingPrepaymentTransactions DA1236 Prepayments Last updated: March-2004

22. Auditing of Prepayment Transactions • Prepayments are distinguishable on the following audit reports, the corresponding VAT amounts are also shown: • Accounts Receivable Cash Audit Trail • Accounts Payable Cash Audit Trail • Accounts Receivable Journal Audit Trail – the transaction amounts are not detailed • Accounts Receivable Refund Audit Trail • Accounts Payable Journal Audit Trail – the transaction amounts are not detailed • Accounts Payable Invoice Audit Trail – if an invoice has been matched against a prepayment item, the G/L distributions list, if selected for printing, includes the prepayment reversals The VAT element of the reversals is not included in the VAT sub-totals, however, it is included in the VAT table at the end of the report DA1236 Prepayments Last updated: March-2004

23. Auditing of Prepayment Transactions • All prepayment items associated with an item can be archived using the following options: • Accounts Receivable Archive Transactions • Accounts Payable Transaction Archiving • Prepayments are distinguishable in the following options: • Accounts Receivable Archived Transactions • Accounts Payable Archive Transactions DA1236 Prepayments Last updated: March-2004