Overview
A Creditor is a supplier that the business owes money to at the end of the year, and will be paid using a cash analysis transaction in the new year. The net figure is accounted for in the current year's accounts but the VAT (if applicable) will be claimed at the point of payment in the new year and has not yet been accounted for.
An Accrual is a figure that has been apportioned to the current year's accounts but will not be charged or paid until the new year. An example of this would be accountancy fees. The final fee to be charged in the new year will contain a proportion relating to the old year and a proportion relating to the new year. The old year's share is shown as a closing accrual. It is treated in a similar way as a creditor.
A Debtor is a customer that owes the business money at the end of the year but an invoice has not been raised e.g. Milk Marque. The net figure is accounted for in the current year's accounts but the VAT (if applicable) will be claimed at the point of payment in the new year and has not yet been accounted for.
A Prepayment is a figure that has been charged in the current year but relates to next year's accounts. An example of this is the rental on a telephone line, which is paid in advance but is removed from the current year's accounts and will be allocated in the new year. It is treated in a similar way as a Debtor.
Two methods are given
- Data Entry for Invoice Based Accounting systems. This method should be used where VAT was claimed at the point of the invoice date in the old year.
- General Purpose Journals for Cash Based Accounting systems. This method should be used in order to enter a closing balance of a creditor or accrual at the end of the old financial year - assuming the VAT will be claimed in the new year. More >>
How to Enter Creditors & Debtors using Data Entry - Invoices
- Enter the unpaid invoice as normal but with a date in the old year.*
- The VAT will be claimed in the old year if the VAT period is still open.
- The outstanding invoice will affect the closing supplier or customer ledger balance and will be automatically be carried forward into the new year.
- Pay the invoice as normal using the 'Quick Pay' or 'Ledger Payments' option in the new year.
*Please note, if you enter an invoice back into the old year and the VAT return for period 12 has been closed, the VAT will be allocated to the current open VAT return. You will see a warning message to tell you that this is happening.
For more help on Farm Business Manager call our Adviceline team on 01594 545022 or email us at support@farmplan.co.uk.
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