Banana Accounting 5.

Introduction Guide to the use of VAT in Accounting

VAT (Value-added Tax) is a tax that weighs on the final consumer. Every VAT subject must
calculate and periodically deposit the tax to the Revenues Authority.
Every country has its own VAT rates that are established in different percentages depending on the
type of merchandise or service. Certain merchandise and services are exempt or excluded.
The percentages vary according to the financial necessity of the country; therefore, there can be
changes in the years.

The periodic VAT statement automatically managed on the basis of the VAT codes

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VAT rate

In this document, to make calculating easier, we will use the following rates:

ƒ 10 % normal rate
ƒ 5% reduced rate
ƒ 0% excluded operations or exempt operations

VAT calculation
Net Price x VAT Percentage / 100 = VAT Amount

Example:
Net price 300
Tax rate 10%
VAT amount = 300 x 10 / 100 = 30

Gross price calculation

Net price + VAT Amount = Gross Price

Example:
300 + 30 = 330

Sometimes the gross amount is known and it is necessary to find the net and VAT amounts.

Net price calculation

Gross Price / (100 + VAT rate) x 100 = Net Price

Example:
330 / (100 + 10) x 100 = 300

The net price represents the cost (purchase) or the revenue (sale) of the company

VAT amount calculation

Gross Price – Net Price = VAT Amount

Example:
330 - 300 = 30
or
330 – [330 / (100 + 10) x 100] = 30

The VAT amount represents the debit (sales) or the credit (purchases) towards the Revenues
Authority.

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VAT rate calculation
VAT Amount / Net Amount x 100 = VAT Rate

Example:
30 / 300 x 100 = 10%

or

[330 - 330 / (100 + 10) x 100]/100 = 10%

Another example:
20 / 400 x 100 = 5%

This way of calculating is used when the rate is not known.

Calculation of the VAT due to the Revenues Authority

1. Sum up all the VAT amounts of the sales (VAT due)

2. Sum up all the VAT amounts of the purchases (VAT recovered)

3. Total VAT on sales – Total VAT on purchases = VAT due to the Revenues Authority

The operations that converge in the VAT calculation must be grouped and presented in the VAT
Statement.

Sometimes the total VAT amount to be recovered (VAT on purchases) can be more than the VAT
amount due (VAT on sales). In this case, there is a credit which will be reimbursed by the Revenues
Authority.

VAT Management with Banana Accounting

The program allows the operations with VAT to be recorded on the VAT codes.

To be able to manage the VAT it is necessary to:

- Choose the “Accounting with VAT” type of accounting

- Select from the examples a predefined accounting plan
- Arrange the VAT accounts if they had not been present
- Arrange the “VAT Code” table with current rates and input the automatic VAT account, (it
should be present in the accounting plan).

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Automatic VAT Account and VAT Treasury Account
To be able to have a report of what is due to the state, it is necessary to insert the following in the
accounting plan:

1. The Automatic VAT account – is used by the program to automatically record VAT
amounts:

- in Debit the VAT amounts related to the purchases (VAT to be recovered),

- in Credit the VAT amounts related to the sales (VAT due)

2. The VAT Revenues Authority account – is used only for endorsing and closing the balance
at the end of the VAT period. It closes with the payment of the VAT debit to the Revenues
Authority or eventually with the cash inflow of the VAT credit from Revenues Authority.

- in Debit the creditor balance is endorsed from the automatic VAT account
(VAT due).
- in Credit the debtor balance is endorsed from the automatic VAT account
(VAT to be recovered).

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The VAT Code Table
The VAT Code table setup allows the definition of all the parameters that are necessary to manage
the transactions with VAT. Once defined, the calculations and the splittings will always refer to the
input parameters.

When the VAT codes are inserted in the “Transactions” table (in the VAT Code column), all the
VAT operations will be transferred automatically in the VAT account.

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Accounting Transaction

Cash Sales

The sales VAT code (S10) is applied.

Purchase in Cash

The purchases VAT code (P10) is applied.

Transaction Effects
Cash Card

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Sales Card

Purchase Card

Automatic VAT Card

VAT Statement at End of Period

The VAT Statement is a form sent from the Revenues Authority to all VAT contributors to declare
the operations with VAT, divided by VAT rates. All data automatically calculated from the program
must be reported manually on the VAT Statement form.

To obtain the VAT Statement, select, from the “Account1” menu, the VAT report command and
choose the appropriate options in the window that appears.

The program automatically elaborates the VAT operations either by transactions or by totals and
calculates the balance to be paid to the Revenues Authority.

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 The balance of the VAT to/for Revenues Authority must always coincide with the balance of
the Automatic VAT account for the period.

Resetting the Automatic VAT Account

After the calculation of the VAT report, it is necessary to bring the Automatic VAT account balance
to zero, transferring the amount to the VAT to/for Revenues Authority account.

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Automatic VAT Card

After the periodical closing transaction, the automatic VAT account will have a zero balance.

Payment of the VAT

With the payment of the VAT, the VAT to/from Revenue Authority account will have a zero
balance.

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VAT to/for Revenue Authority account Card

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