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MYOB and AccountEdge - Tricks of the Trade

Introduction
Navigation
Banking
Credit Cards and Loans
Sales
Purchases
VAT Bookkeeping
VAT Schemes
Preparing a Back dated VAT Return
VAT for Imports and Exports
VAT EC Sales list and Intrastat
VAT procedure for Period Ends
Bookkeeping for Expenses
Staff Travel Expenses
Capital Expenditure
Stock
VAT Treatment of the Particular Classes of Expenses
Building Industry
Dividends
Management Accounts
Before Year End
At Year End

1. Introduction

AccountEdge
MYOB and Mamut AccountEdge software for small business financial management and accounts. This manual gives guidance on some of the most complex aspects and adaptations. It is not a comprehensive guide to what is a very sophisticated program.
This manual is written for UK users. Any of the points can be adapted for other countries, particularly those that in administrations where you have to account for sales tax, GST or VAT. It was originally written for MYOB Accounting and MYOB AccountEdge, but has been updated and it now also applies to both Mamut AccountEdge and Acclivity. The word 'AccountEdge' is used throughout but the instructions also apply to those using MYOB. It also relates to early versions of MYOB such as MYOB v11.

We are happy to welcome comments or improvements to these procedures. Please email us at info@simpleaccounting.co.uk

2. Navigation

Navigation in MYOB and AccountEdge is straightforward. However it is fundamental that you understand navigation before you start to explore the functionality of the system. The navigation is unusual because it is based on ledgers. Each ledger is based on job roles and drill down. It is not a sequence that many other bookkeeping programs generally follow; certainly not with the effectiveness that AccountEdge has been designed.

Try and understand the following sections before you embark on the more detailed procedures further on.

To enter AccountEdge

In windows go to Start -> All Programs -> AccountEdge and click on the AccountEdge icon.

On a Mac, double click the AccountEdge desktop icon. Alternatively click on the icon 'Applications'.

This will then bring up the standard welcome screen from where you can click on 'Find' to locate your company datafile. Once you have located your datafile you will then need to 'open' and enter your username and password. Keep a record of where the datafile is stored if you are using MYOB. If you are using Acclivity or Mamut the software will remember the location of the datafile you last used.

Desktop Icons

If you have had a consultant visit then he is likely to have created a desktop icon for your most important datafile. To go into AccountEdge just click the AccountEdge icon. On one of our standard datafiles enter your username 'Administrator'; the standard password is 'Administrator'. If you are using the file with other users check the radio button for the datafile as 'multi-user' access, and 'TCP/IP'. Press Enter.

Leave the System

To leave the system on a Mac, go to 'AccountEdge' and then 'Quit' at the bottom. On a PC look for the 'file' instruction in the top left corner and underneath hit 'Quit'.

Navigation within AccountEdge

If you have had our consultant visit you, we will have explained to you about the difference between ledgers, the menu bar at the very top of the screen, the basic functions of each ledger and the enquiry options at the foot of the command centre. Bear in mind that there's usually more than one way to access any routine or function.

Backup and Verification

As you leave the datafile AccountEdge will prompt you to verify the datafile (which checks for errors and corruptions) and backs the file up. You should run regular zips of the datafile. On the Mac, MYOB uses an internal program called Aladdin Stuffit. On the PC, AccountEdge uses an internal version of WinZip which is labelled 'Backup'.

The Stuffit or Zip files can be restored from within AccountEdge if you have a corruption in your data. Alternatively you may have a series of very poor or confused entries that mean that you would rather restart from a version of the file from the previous week. It is therefore a good idea to keep multiple backups.

3. Banking

To use AccountEdge, the key objective should be to keep an accurate bank reconciliation. It is important that you start entering the transactions to square the receipts against the actual banking.Enter bank payments against the actual payments going out. Check these against the bank statement to keep your bookings up to date. Do the reconciliation at least every month (or every week in busier organisations). Nothing in bookkeeping matters as much as keeping the bank reconciliation tight.

Spend Money

When you are entering payments I suggest you initially use 'Spend Money' mainly or entirely. Don't use the purchase ledger- it creates more work. It also leaves the transaction less easily amended than if you use 'Spend Money'.

Undeposited Funds

Clear any values from the bank account (undeposited funds). We generally advise against using 'Undeposited funds' at all. We usually alter the defaults on all data files we examine or create. This will prevent you from creating undeposited funds transactions within the system. Book receipts direct to the bank - it is less confusing. If we do this then just ignore the function 'Prepare bank deposit'.

Bank Statements

I suggest you get your physical bank statements sent at the end of each month if they aren't currently. Then you can reconcile them easily and regularly. Get them sent in line with your VAT and business tax period ends.

Bank Reconciliation: Simple Method

I recommend you initially get used to using the bank register. This has a running total on the right hand side.

Say, you have booked a cheque payment on the date you issued it. There will be a timing difference between the date you issued the cheque and the date it cleared your bank account. This throws the bank account running total on the bank register report.

Nowadays most payments are made by BACs - so the clearance date is known in advance. Therefore put the entries in as they clear the bank. If the cheque clears late you can amend the date later.

It doesn't matter if the payments are wrong, the VAT codings inconsistent, or if the accounting is out. The key is to enter each transaction on its clearance date, not the date the cheque or BAC's payment was raised or the date the deposit was banked.

Bank Reconciliation: Full Method

In the longer term you may need to use the 'Reconcile Accounts' function for more complicated reconciliations. The reason for using this function is if you have timing differences between the banking date and clearance dates of significant values of sales receipts and cheque payments.

Go to 'reconcile accounts'. Get your latest statement. Type into the new statement balance, the bank statement date, and the new value at the end of the bank statement. You enter the balance from the printed statement from the bank. The challenge is to get the calculated statement balance (which is the MYOB or AccountEdge working) to agree.

When the physical bank statement arrives you have to do the ticking and bashing through the 'reconcile accounts' procedure, and check items on the books have actually cleared.

Also in your bank reconciliations, note that at the end of each month you may receive a small amount of bank interest. Don't forget to post that because otherwise your bank reconciliation will be out again.

Once you have run the reconciliation there is further work to do. Clear any older transactions you have on the 'Reconcile Accounts' screen. Those that are dated older than about 2 months old are highly suspect. Normally you should reverse these. It can be confusing if you simply delete them. Make sure they are not going to clear, but if they turn up subsequently then reenter them with a more recent date.

It is really important that you print off the reconciliation report when you post the reconciliation. I should staple it with the bank statements. File these manually in a ring binder.

Then you close the period off by bringing forward the 'locked' date in the preferences.

If you end up with redundant transactions you can delete them or reverse them.

Interest Received other than at the year end.

I would recommend that you book bank interest as 'Receive Money' transactions to an 'Interest received' account in the 8- range. If the interest is yet to be received then put in a 'receive money' for the accrued element the of year-end interest. The fact that the receipt hasn't yet been received doesn't matter. Put a balancing receipt in for the extra when it is paid to you. It will get cleared through the bank reconciliation when eventually the interest receipt does eventually come in.

Transfer between a Current Account and a Linked Deposit Accounts

Businesses often have a linked deposit account to their bank current account. This can be programmed by the bank to switch the month or week or day end balance into a savings/deposit account, which pays higher rate interest. If you use such an account then be careful not to allow any other transactions to or from the savings account. Consider the savings a/c balance as part of the current account and reconcile the pair in one go.

Transfer between bank accounts

To transfer money between bank accounts, you can use 'Transfer Money' feature. This button is only available on more recent versions of AccountEdge. This button only works for transferring sterling between Sterling bank accounts.

However, generally we prefer to recommend 'Spend Money' instead of using 'Transfer Money' at all. This leaves the transaction as an amendable transaction.

If you're transferring between say a Euro account and your Sterling bank account, use 'Spend Money' as a Euro transaction. Set the currency to Euros. Enter the transfer just like it was a foreign currency cheque. Enter the euro amount, the cheque number as 'TFR', and the memo: 'Transfer from Euro to the Sterling bank account'. The account number in the analysis is the Sterling account itself. Alter the rate such that the sterling received equals the amount transferred in after bank charges. Ensure the VAT analysis is N-T.

Money received to the wrong firm

Many businesses actually have two firms operating from the same premises. Say, if you receive money to the bank account of firm 1 from a customer of company 2. The simplest treatment is as follows:

Book the receipt in the AccountEdge for firm 1 as a 'Receive money'. Book the receipt as debit into the bank account. Post the credit to the same bank account.
Bank the receipt into firm 1's bank account.
Raise a firm 1 cheque to company 2 for the full value of the mistaken receipt. Do not book this cheque in firm 1's accounts.
Bank the firm 1 cheque into the company 2 bank account.
In company 2 record the receipt of the cheque from company 1 as though it was a receipt from the original customer in the company 2 sales ledger.

When you come to the firm 1 bank reconciliation, both the debit and credit entries are on the one receipt. This will allow you to reconcile both the money from the customer and the payment on to company 2. The two entries will be separately available to reconcile against each other. The original receipt will be from the customer into firm 1. Meanwhile the payment against the receipt will be the cheque or BACS payment that you have made from firm 1 to firm 2.

Recurring Transactions

Get used to saving transactions such as spend money for use in following months on the recurring transaction list. Monitor the 'next due' dates carefully. Generally, all of the transactions need to have the 'Save my changes when I record this recurring transaction' box ticked in the schedule. If you leave this unticked then the recurring template will not be amended when you use it next.

4. Credit Cards & Loans

Paying off Credit Card Bill

Let us say you're paying off a business prepaid debt or a company credit card.

My advice is not to use the transfer money facility on the accounts ledger. Do not use spend money to transfer money into a separate credit card account. This is what you might have done in the past.

Bank Statements for Loans

You need to regularly reconcile liability bank accounts (e.g. mortgage accounts). You need to reconcile these just as if they were a bank account. Obviously with an overdraft you therefore have a negative bank balance. Please use the mortgage account statements you've got and process them using 'Bank Reconciliation'.

It is therefore a good idea to get a regular statements for any loans or mortgages. Get the statement quarterly or at least annually. You need this value to be proved when you do the end of year reconciliations. This is vital if you seek to recover tax on loan interest paid.

It is important you obtain a statement, or at least a loan valuation on the phone, of the amount that you owe on your loan from your bank at the end of your financial year. The difference between the payments you make and the reduction in the outstanding loan should be charged as business interest, and therefore recoverable against your Corporation Tax bill.

Intercompany loans

These are common in more complex corporate arrangements. Decide if these are interest paid. If so you should acknowledge that there is an outstanding liability. You can do that in the form of an exchange of letters. That acknowledgement can then go into the file for each business.

Tax on interest paid or received then becomes recoverable or payable on your business tax return.

HP

You need a company a purchase for the any car bought on HP. The price is the outstanding value on the HP. No VAT is can be reclaimed on the sale of a second hand car.

Get the purchase bill and all the relevant costs added up. Include the input VAT – this is not allowed against the VAT return. The total amount charged is then an HP liability and needs to be to the credited to the liability account 28xxx.

The HP company usually adds some further charges which need to be debited to the bank charges account, usually 6-9xxx. HP agreements tend to capitalise interest but it cannot be charged to the profit and loss account until it is actually incurred. Put the interest into a negative liability account alongside the amount borrowed. Hold the amount of interest to be charged as an asset or debtor until the point that it can be allocated to an asset account.

5. Sales

The Sales Ledger can be used to a certain level just by using Enter Sales and Receive Payments. These notes discuss more complicated uses.

Emailing a sales order acknowlegement in the appropriate format

You can email sales order acknowlegements from the system direct to the customer.

Before you email the sale or quote, you may well need to alter the print format. For example a format suitable for hard copy printing onto letter headed paper will not have as much information as a PDF format which is printed on plain paper by your customer.

When you go to 'Send To', 'Email', select your form. If you are in the individual quotation that you want to email, and then you can check under 'Print' that the form is the name of the invoice format (or 'form') that you want to use. Don't hit 'Print'- instead go to 'Send To', 'Email'. Then type in the email address if you haven't already entered it in Card Details, and then hit 'Send'.

FRM Files

You have to copy the .FRM file to each hard drive for them to be effective. Save in the forms folder under 'Applications' or 'Program Files'.

Customised Stationery

You can amend the appearance of your sales documents using 'customise invoices'. IN version 11 you can amend formats if you hit the print/email invoices button and then hit 'Customise' button at the bottom of the window that then appears. You will need to customise your invoices around your business stationery, particularly if you have formed a new limited company. There is an explaination on MYOB Centre of what is required on an invoice.

You can also find 'Customise', under 'Setup', 'Customise Forms' and then either 'Sales Orders' or 'Statements'. You can amend the forms that you've got drafts of from the system-we'll happily provide advice and support.

It is good if you can get an electronic version of your logo. You need access to it for the customisation for the email purchase orders invoices and statements.

Orders: a caution

I urge you to be careful about using the sales order system until you're quite confident about handling the bank reconciliations. If you use the order system and accept deposits against them the amendability of your sales receipts is removed. Bank reconciliation is effectively required for VAT compliance; as that is a legal issue, it has to have first priority.

The reason is that when the order is turned into a sale, it protects all of the cash receipts and sales entries that are involved. You can then only amend through reversals, which are complicated. Using orders can make reconciling the bank harder.

Summary Recording Proforma Invoices

There are two alternative ways of recording a sales deposit or proforma invoice.

You can have two separate invoices, one for the deposit and one for the balance.
Alternatively you can book a deposit receipt against a sale order. This is then turned into a sales invoice at the point that the work has been completed. The deposit then forms a part payment against the balance. The balance applied then leaves a new net figure. If you have the correct invoice customisation the net value still to come in from the customer will print. The original deposit is then a locked transaction.

SAL advice is not to use sales order deposits as in 2. above. They often create difficulties. Don't use yellow sales orders unless your bank reconciliation is permanently tight and you only rarely have sales returns.

There is an alternative to issuing orders and crystallising deposits when you turn them into a sales invoice. You could instead issue orders as a sales invoice at the point of receipt, and then issue a credit note should the sale fail to crystalise.

Back Orders

You can deduct items off the order and put them into the 'Back Order' column if they are out of stock. On posting this creates another draft sales order for the items that haven't yet been despatched.

Sales Cash Receipts using a Takings Sheet

Under certain circumstances it is easier to enter your sales through 'Banking', 'Receive Money' than through the 'Sales Ledger'.

Set this sale as a reccuring cash receipt. Go to receive money. Look for the 'Use Recurring' button. Then overwrite the CR number with the number actually at the foot of each Bank Giro credit slip. This assists the bank reconciliation.

For a complex breakdown of cash sales you need a Daily Takings sheet. There is a draft on the SAL website.

Vouchers

Sales vouchers are receipts, which do not create bank transactions. These are not cash receipts but are still VATable or taxable income. They become income and VAT taxable at the point we receive the voucher not the point we make the reclaim. At the point of the original sale the deduction from the bank receipt needs to be booked to a specific debtor account, free of VAT. This debtor is best as a quasi bank account.

Time Billing: informal

There are several options with selling time.

You can avoid using time billing entirely. You could simply use item codes. You can add item codes to record standard sales (such as monthly or initial set-up charges or annual domain renewal fees or hosting fees). All sorts of services and functions like this can be entered as item codes. It is important that services are flagged "I sell this item" only. You can create items specifically so they can be merged in with the time-billing invoices. This method has the disadvantage of not recording the time you spend on each project each day.

Using items does give a wide range of sales price options. MYOB expects you to undertake tiering of your customers into six 'l price evels'. The prices associated with these levels can also be volume related.

If you feel that time billing is too heavyweight a solution, a halfway house is to use the professional invoices. This format allows you to quote a date and then enter a whole string of activities in the description fields. This gives you something a bit like a time-billing invoice without having to enter the activity slips necessary for the full time-billing system. The sales of items can be added into the same invoice.

Time Billing: formal

You could have one generic activity for each customer. This can be flagged 'Use customer billing rate' to charge the client for mainstream work.

You can use the time billing using the employee-billing rate. Alternatively you can use other features of MYOB to replicate the time billing system more simply.

You can have other activities charged at specific rates for the premium work. Say you charge extra for a specific service. Say you also want to have a differential rate between the premium clients and perhaps some charities with whom you have negotiated a discount rate. If you want to tier this you could specify different activity codes.

You could charge the premium work off using the time billing method. Each service would have a specific activity. You could flag this service with 'Use employee billing rate'. You could then have two separate employees, yourself, one called 'Main' and one called 'Charity Rate'. The combination use of the employee and the activity code give you the matrix of default rates per customer. This is all without resorting to adjusting the billable value directly, or amending the default rate.

You can have activities in 'item' style invoices.

Changing the Format of Delivery Notes

It may help to reformat the delivery notes from Packing Slip (Item) to Item Sale. All three formats will be numbered according to their place in the process.

For version 11 on a PC please copy them to your 'C:\Plus11\Forms' folder and to all the other hard drives. All form files must be copied into the same location. On a Mac please use the forms folder under Applications\MYOBPlus18\forms.

Grant Income

You can code grants as a negative expenses to offset the costs of the line that the government grant was funding. However if the grant is unconditional then put it into a separate 8-range income account. Make sure the receipt isn't taxed. Also make sure it is N-T for both business tax and VAT! Why pay tax on the money you get back from the government?

Statement Customisation

Consider using the activity statement with your customers. If you have complex financial arrangements with customers this is a way of giving them some confidence in your finance system. This clarity can assist if you end up in a dispute.

Reconciliation- Keeping the Sales Register Clear

Square off any outstanding returns and credits. Keep reviewing the sales register, in particular the returns and credits tab. When you enter a credit note you need to match it immediately. Enter the amount that you've paid back under amount applied, or use the sales ledger credit note routine to apply the credit to a sale. Try to keep the entries under this tab clear, or at least under control.
Regularly clear the outstanding orders from the sales ledger. Regularly remove any redundant open invoices.

Sales Orders

Clear all of the orders currently sitting in the sales register. Those that have been paid proforma should have an effect on the VAT if the order has been fulfilled. Receipts for these can easily cause an imbalance on the customer's ledger that then cannot be cleared. This is the main reason why Simple Accounting Limited does not recommend use of the sales orders as a way of recording proforma deposits.

Recurring Sales

You can create new recurring transactions very easily. You go into 'Find Transactions', enter the invoice number, open the invoice you want to save. Hit 'Save as Recurring' to save a template sales invoice which you can use again and again.

6. Purchases

Manual Purchase Ledger

For simplicity SAL usually recommends new clients initially keep a manual purchase ledger. Keep all of the bills that are yet to be settled in a ring binder. That paper Purchase Ledger file is its own record of people you owe money to.

You have to keep on top of this manual file. If you do so you don't need to duplicate this purchase ledger in the MYOB system. File the bills in the order you need to pay them. But do not key them into MYOB until they are paid.

Using the manual procedure you can save time by steering clear of the purchase ledger in MYOB. You only ever enter charges, including the Visa charges and the AMEX charges, using 'Spend Money'. You only record them at the point you have paid them.

Reimbursing Expenses using Job Codes

You could be in the position of having to lay out monies on behalf of a customer. You could use the job coding to reclaim reimbursements of expenses paid out. Use the 'reimburse expenses' facility if there is a possibility you might miss costs that you've laid out. It is easier to come to the final account for a customer using this facility.

This is particularly useful if expenses start to get very complex. To do that create a job code, specifically name the customer to whom you're going to recharge the expenses laid out, and tick the 'reimburse expenses' box. When you come to the end of the job, go into sales, enter a sale and put up the customer's name. Then hit the button at the bottom saying 'reimburse'. This will create a sales invoice based entirely on the costs you've incurred,but not yet claimed.

Recurring Purchases

When you enter the purchases, try to use recurring templates. Generally you will use them as a good first draft of the numbers and items typically used by that particular customer.

All of the purchases on the recurring transactions list need to be amended through 'Edit Schedule'. Check the box labelled 'Save my changes when I record this recurring transaction'. If this box is unticked, please tick it. If you leave this unticked then the recurring template will not be amended when you use it next.

Payment Terms

Do a quick cost-benefit analysis of paying the suppliers weekly or monthly. Payment discounts are sometimes available from suppliers for paying them early. Paying suppliers promptly may however increase bank charges and reduce cash flow.

Use Purchase orders to track your stock needs

You need to make the entry of purchase orders into the system. Do this rather than entering them as separate bills and booking the stock purchases only on the receipt of the bill.

This will have the advantage of allowing you to run the 'Analyse Stock Summary Report'. This shows the amount of stock plus the amount of stock on order. It also allows you to judge the timing of orders of fresh material. Deliveries to third parties can be ordered by entering the delivery address into the relevant field.

You can email directly out of this system using the 'Send To' button. When entering the purchase orders to your supplier, you can print them on the hoof by using the 'Send To' button. Alternatively you can go back to the Command Centre and use 'Print or Email Purchase Orders'.

When the supplier's bill arrives go to the Purchases Register, go to Orders and find the order for the item which you were being billed for. Check the order value and number; amend if necessary. Add a supplier invoice number and hit the 'Purchase' button. By turning it into a blue, that implies that the order has been received and accepted and that the bill can now be paid.

There is an interim 'goods received' stage if you need it. Simple Accounting Limited doesn't generally recommend it.

Leases

Book the monthly cost of these into 9-xxxx range nominal account, using 'Spend Money'. Add the VAT and reclaim it that source on each payment you make or the date you make the payments.

7. VAT Bookkeeping

VAT Cashbook

If the VAT inspectors were to call suddenly, they may ask you where your 'VAT cashbook' is. This may have been a spreadsheet before you started with Accountedge. Now it is an Accountedge report.

You've got to ensure that the VAT [Detail] reports exactly match what has been entered in your previous VAT returns at each period-end. This is the case even if you get a subsequent adjustment, such as a late arriving purchase invoice or a correction to a previous sale. You should try to make the change into the following VAT quarter.

You should also use the opportunity of each quarter or year end to get your VAT filing in order. Take a copy of the VAT return you submit whether manual or online. Print off a 'VAT [Detail]' report to check against. File it behind your copy of the VAT return, so that you can make sure that it is exactly right. The 'VAT [Detail]' report is your 'VAT Cashbook' which you are legally bound to keep.

File all of these papers in a lever arch file. You have to allow inspection of this cashbook should the HMRC come to investigate you.

Recurring VAT Journal

A period end VAT journal is entered as a standard recurring transaction in all Simple Accounting datafiles. It is important to remember to keep the alert on so that the administrator is reminded to run the journal as it falls due. Also, tick the box at the bottom which says 'Save my changes'.

The period end journal is dated the last day of the VAT period and usually has two lines:

The amount that is debited to the 'VAT Due' account is the balance on that account at the period end.
The amount that is credited to 'VAT Due On Next Return' liability is the same amount as on the report: 'VAT Return'. This report is on an accrued basis. The credit to the liability account is also the same as the box 5 figure on the VAT Return.

However there is a twist if you are on cash accounting. An element of the accrued VAT isn't going to be payable. This is the 'VAT Cash accounting element'. You hold this value aside in a third VAT liability nominal account.

Closing the VAT period end

When you've finished the VAT period-end, it is very important that you put on the lock period function. You find this function under 'Setup', 'Preferences', 'Security'. Please advance it to the current quarter-end to prevent retrospective alteration of the VAT cashbook.

Conclusion

All this may seem fearsome; but it only has to be done at a VAT period end.

The huge advantage of the procedure I describe is that the VAT system doesn't need further reconciliation. The system self-reconciles. As long as balance on the 'VAT Due' account is nil at each period end the justification for each VAT return is transparent. If you end up paying more or less than the calculated liability the outstanding liability for the past VAT periods is separated from the VAT liability building up for the current period. The year-end justification for the VAT balance should ideally become the VAT Return itself. Simple.

If you move to VAT annual accounting all this can become part of the year-end accounting job. The chances are that your accountant would do this for you, whether that is Simple Accounting Ltd or another firm.

8. VAT Schemes

Accrued Accounting

This is where you pay VAT on sales you have invoiced out. Correspondingly you claim VAT on purchases when you are billed, not when you have actually paid the invoice off. If you are on this scheme print off 'VAT Return' and use it to complete the VAT return. You run this report from the 'Index to Reports'. Check the report balance agrees to the amount on the 'VAT Due' account.

Bookkeeping at an Accrual Accounting Period End

The 'VAT Due' liability crystallises at a period end, because you are issuing a VAT return to the HMRC. At this point journal the balance out of 'VAT Due' (debit) and credit it to the 'VAT Due on Next Return' Account. Date the journal the last day of the quarter. This should reduce the balance on 'VAT Due' to nil.

Cash Accounting

This excellent scheme is where you only pay VAT on sales you have actually been paid for. Correspondingly you only claim VAT on purchases you have actually paid off. There is an £1.35m pa turnover threshold. If you are on this scheme print off 'VAT Return [Cash]' and use it to complete the VAT return.

Bookkeeping at a Cash Accounting Period End

As under annual accounting the 'VAT Due' balance crystallises on the last day of the VAT period because you are issuing a VAT return to the HMRC. So we need to journal the balance out of 'VAT Due' and post the amount payable into 'VAT Due on Next Return'.

However, there is a twist if you are on cash accounting. An element of the accrued VAT isn't going to be payable. This is the 'VAT Cash accounting element'. You hold this value aside in a third VAT liability nominal account. Take this to a 'VAT - Cash accounting element' account.

The period end journal is dated the last day of the VAT period and therefore has three lines:

The 'VAT Due' account works on an accrued basis (as opposed to the cash basis you may use for your actual payments). The amount that is debited to the 'VAT Due' account on that account.
The amount that is credited to 'VAT Due on Next Return' is the same amount as on the report: 'VAT Return [Cash]' as you are on cash accounting. This report is on a cash basis, and will give a different payable figure to the accrued report above. It will be a debit figure if you are reclaiming money from the HMRC.
As you are on cash accounting there will be a difference between 1 and 2. The difference between the two figures goes to 'VAT Cash accounting element'.

Annual Accounting

This is also an excellent scheme, which I recommend to most clients turning over less than the £1.35million per annum threshold. Most businesses account for VAT quarterly. If you are on this scheme then, during the year you pay annual instalments on an estimated basis.

Say your typical annual payments total £50,000. The HMRC will agree a figure with you of, say £5000 per month for each of ten months. The bookkeeping is easy! You book these payments to a liability nominal- 'VAT Payments on account'.

Bookkeeping at an Annual Accounting Year End

Then you come to the end of the year. During that year all of your real VAT liabilities have been building up in the 'VAT Due' account. This is the account you should already be familiar with. When you get to the end of the year, check that the balance on the 'VAT Due' nominal account agrees to the 'VAT Return report'.

Then run the cash or accrued process as described above, depending on which form of annual accounting you are on.

The amount payable at the end of the annual accounting period therefore becomes the difference between 'VAT Due on the next return' and 'VAT Payments on account'. Code the final payment as a 'spend money' transaction to pay the VAT so as to clear these two nominal accounts down to nil.

Annual Accounting cashflow advantage

Say your VAT year is also the calendar year. Say you have a liability in one year, (i.e. four quarters) of £50,000. This would equate to £5,000 per month. These are paid in nine monthly instalments and a balancing payment also of £5,000 at the end of February 2012. When you start your scheme you can negotiate the payment with the HMRC dependent upon your last four quarterly returns.

Imagine you expect to significantly increase your turnover in 2011. The scheme will save you cashflow for VAT on any growth that you have above the actual for the previous year. The VAT instalments you pay in 2011 will be assessed only on the basis of your 2010 liability. You retain the cashflow advantage until Feb 2012!

Choice of VAT scheme for simple accounting

Under annual accounting you can account for transaction dates more simply than before. Precise booking at quarter ends no longer matters. If you move to VAT cash accounting, we suggest that should you enter all receipts and payments on the date that they clear on the bank statement. Do not worry about the date on which cheques are written. Post them on the date that they are reconciled. If you are going to cash VAT accounting that will be acceptable to HMRC. The bank reconciliation can then be matched through the bank register module.

If you are on cash accounting we also suggest you enter your overheads as 'spend money' transactions. Use the cash ledger and avoid using the purchase ledger. These overhead payments include payments to yourself, dividends, repayments of any directors or incorporation loans, payments of expenses to your staff, payments of standard expenses you need for the business, the monthly standing orders, utilities etc.

All this simplifies the bookkeeping considerably. For these reasons I we often suggest clients apply for annual accounting for VAT (which you need permission for) and use cash accounting (for which permission is not required).

9. Preparing a Backdated VAT Return

If you subsequently change your mind about the VAT status of a lot of historic transactions you might decide to amend them inside Accountedge. This would retrospectively alter your VAT report. Running the reports at the time you compose a new VAT return leaves a nice clean trail as to what you have done. Here is the procedure:

Let us imagine you wish to correct for errors all the way back to the point you registered for VAT. Say you wish to doo this all in one return. Let us assume this was 1st July 2009 and you are now preparing the return for Sept 2011.

Prepare a spreadsheet with nine rows, equivalent to the nine boxes of the VAT return. Then prepare the equivalent VAT Accountedge reports (after you've done the debtors, creditors and bank reconciliations) from the 1st July 09 to 30th September 11.

Next, trace through your paper records and establish what figures you previously reported. Enter to the spreadsheet the figures you entered into each box for the VAT returns sent in September 09, December 09, March 10, June 010, Sept 010, Dec 10, March 11, and June 11. Those eight returns should be added together.

Deduct the sum of those eight returns from the sum of the VAT reports from 01/07/09 to 30/06/11. The difference figures, which could all be positive or negative, are those figures that should be added to the Sept return in each box in the VAT return to September 2011.

This will correct the reports cumulatively. It may enable you to reclaim any missed VAT inputs. This is common. Many businesses fail to properly claim from periods before they registered and in their first year of trading.

10. VAT for Imports and Exports on Mamut AccountEdge and MYOB v11

There was a change in reporting rules for VAT returns in Jan 2010. Imports/ purchases from either the EU or elsewhere in the world have now become particularly complicated to report. The HMRC has previously been mainly worried about actual goods from the EU only. Now they are apparently worried about all the purchases you may make from abroad.

The most common mistake is coding transactions which are outside the EU. Strangely you are now required to account for deemed VAT on services imported from (say) the USA in a similar way to the purchases you make from the EU. UK small business owners often don’t know how to make the declaration on the turnover boxes of the VAT return report (boxes 5, 6, 7 and 8). This could lead to a VAT inquiry by the HMRC. Unfortunately we have known for some time that Mamut AccountEdge and earlier versions of MYOB are not fully compliant with HMRC’s very complex reporting rules.

A) Imports/ Purchases

The basic rules are as follows. If you are buying from within the EU, a supplier is obliged to zero rate VAT to you, as long as you report your VAT number to that supplier. If you import from a business that is registered for VAT in France, you should be able to avoid paying French VAT. You have to record the purchase as both a sale and a purchase with a reverse charge for the VAT.

When you are buying goods from the EU you can use the preset 'ECP' code in AccountEdge. This is a special type of VAT code labelled ‘VAT – EC Purchases’. This has the effect of adding the deemed VAT to both the sales VAT (box 2) and the purchase VAT (box 4). As long as you code the purchase, or the payment of the bill with the ECP code then it is all sorted for you. The accounting is invisible within the system. You do not then need to worry about how the return is composed.

The new reporting problem comes if you are importing a service whether or not the service has come from the EU. The HMRC expects the sale and reverse to put the VAT into boxes 1 and 4, not 2 and 4 as it is with goods. There is no suitable code to do this within MYOB – so you have to code as for goods and do a manual reallocation.

Imports/Purchases from	Special Reporting	Services	Goods
USA/India/ rest of world incl. Switzerland and Jersey	Reverse Charge on Services	[a]Deemed VAT: boxes 1 and 4 *Net: boxes 6 & 7 Use ECP & reallocate	[b]VAT: box 4 Net box 7 Use S for Import VAT Usually S for any Excise Duty which is liable to VAT
EU: have you been charged foreign VAT: yes?	See Section C below
EU: have you been charged foreign VAT: No?	Reverse Charging	[a]Deemed VAT: boxes 1 and 4 Net/Gross: boxes 6 & 7 Use ECP and reallocate	Deemed VAT: boxes 2 and 4. Net/Gross: boxes 7 & 9 Use ECP – EU purchase
UK Incl Isle of Man (std rated item)	None	VAT: box 4 Net: box 7 Use S for std rated	VAT: box 4 Net: box 7 Use S for std rated
UK Incl Isle of Man (zero or exempt item or service)	None	Net: box 7 Use Z or E	Net: box 7 Use Z or E

Notes:

[a] No suitable code is available in the AccountEdge standard setup. Use code 'ECP' and manually move the VAT from box 2 to box 1. Similarly you move the Net from box 9 to box 6. This may be easier if you create a second code like ECP but for services only.

[b] The VAT here is usually recovered by the HMRC through a freight handler at the point of entry to the UK. VAT in this section has to have been paid and receipted before it can be reclaimed from the HMRC. Sometimes VAT is imposed on the cost including Duty. If so use 'S' for that part of the cost.

B) Exports/ Sales

The basic rules are these. Goods or services sold outside the EU are zero rated.
The service or goods are zero rated if you are selling to a business in another EU country if you have a valid VAT number for them. If you are selling services or goods to the EU to individuals (rather than VAT-registered businesses) then you have to charge VAT.

If you are selling goods to the EU and your customer is VAT registered, then you charge no VAT. However you have to declare the VAT turnover in box 8. In this case only you use the standard AccountEdge EU sales VAT code 'ECS'. If you sell goods abroad you have to complete an EC sales report.

Flag customers who are registered for VAT as 'EC Customers'.

Exports/ Sales to:	Special Reporting	Services	Goods
USA/rest of world	None	Gross: box 6 Use Z - Zero	Gross: box 6 Use Z – Zero
EU Businesses	EC Sales List	Net : box 6 only Use Z – Zero	Net in boxes 6 & 8 Use ECS – EU Sale
EU Private individuals	None	VAT: box 1 Net: box 6 Use S - Std rated	VAT: box 1 Net: boxes 6 only Use S - Std rated
UK or Isle of Man	None	VAT: box 1 Net: box 6 Use S - Std rated	VAT: box 1 Net: box 6 Use S - Std rated

C) Services or Goods on which foreign VAT has been imposed

Try and avoid this sort of transaction. If you are charged EU VAT you are likely to need the VAT EU Refunds Service to reclaim that VAT. While the VAT is being recovered from say the French VAT authorities, the cost itself must be booked to the VAT return. Use No Tax to do this.

There is an online facility for the VAT EU Refunds Service on the HMRC Website. Look for ‘do it online’. Register there to recover, say French, VAT on your purchases. This will relate to a claim via the HMRC to recover input VAT on costs paid abroad.

Imports from	Services	Goods
EU: if you decide not to bother to recover it	Gross: Box 7 Use E – Exempt	Gross: Box 7 Use E – Exempt
EU: if you decide to recover it	[a]Use N-T No Tax	[a]Use N-T No Tax

[a] If you should have obtained the goods or service for a business then you should be able to reclaim the VAT from the foreign tax authority through the HMRC portal. When you recover it, book the receipt as a No Tax reduction in the cost of an expense.

Input tax reclaimed from foreign tax authorities through the HMRC portal falls entirely outside the scope of VAT.

EC Sales List

Export of Goods

Technically if you make any export of services to businesses in any EU states which have been zero rated, you are required to report the fact on a monthly EC Sales list. Only zero-rated sales to VAT registered businesses count.

Export of Goods

Technically if you make any export of goods to businesses in any EU states which have been zero rated, you are required to report the fact on a monthly EC Sales list. However sales of goods to EU countries only have to be reported quarterly for smaller businesses. If you export £70,000 annually you would have to complete the form quarterly not monthly.

11. VAT EC Sales list and Intrastat

A) EC Sales list

This applies when you sell goods to the EU at zero rate and therefore, you have made a declaration in box 8.

You are obliged to check the validity of an EU customer and verify their VAT registration number before you sell anything to them zero rated. Use Registration Status check service on 0845-0109000 or look at the VAT checking service on the European Commission Website.

Any box 8 transaction on your VAT Return triggers the need for a return EC Sales list. The turnover threshold is therefore zero.

If you are selling goods to an individual who is unregistered that lives in the EU, then you must charge the standard rate. The net also has to be reported in box 6 only. If the card that has been ticked has an ‘EC Customer’ then you can trip up here because an S code will post the net to both boxes 6 and 8. You may then get questioned if you have not returned an EC Sales list. It is therefore best if you (counter intuitively) do not flag private EU consumers with the EC Customer flag.

Please note that the failure of MYOB/ AccountEdge to properly record these two sorts of transactions has been reported to the staff at Acclivity and Mamut.

B) EC Intrastat

This is a more complex report that more extensive traders are required to complete. The threshold for this is much higher than most small businesses will need.

If you sell £250k pa goods (ie excl services) exports to EU you have to submit an Intrastat sales list.
If you buy £600k pa goods (ie excl services) imports from EU you have to submit an Intrastat purchases list. AccountEdge can help you with this.

Intrastat reporting can be supported within MYOB and AccountEdge. There is specific reporting within QuickBooks.

Intrastat

Intrastat is a report for those importing larger values of products. If you need to provide this MYOB and AccountEdge can help. You need to record all of the customer and foreign supplier VAT numbers with their country prefixes.

MYOB can support EU sales list and full Intrastat returns.

Misunderstanding the EU customer and the EU supplier on the sales and purchases cards

A card should only be ticked as an EC Customer if it is a customer whether registered or not for its VAT in its own country to sell goods that are exported from the UK. Similarly you should only tick the 'EC Supplier' box on a card if that supplier is sending you goods to be imported into the UK from the European Union (whether the supplier is registered or not). The critical thing that people get wrong is that the requirement is for goods to be declared not services. So Google is based in Ireland, it may be selling you a service from somewhere else in the EU, but it is not an EC supplier in the AccountEdge coding.

Intrastat

Goods only £600,000 pa imports exports £250,000. Then you have report values. Tested against boxes 8 and 9.

EC Sales List

Export of Goods

12. Vat Procedure for Period Ends

Accounting at VAT Period Ends is a formal AccountEdge procedure. The procedure is the same whether you are on VAT quarterly or for those on annual accounting.

The first priority is to do the bank reconciliation. Ideally this should be on the exact date of the VAT period end.
You should make sure your bank accounts all reconcile to the relevant statements - the bank statement balance to the bank reconciliation or the bank register.
Then run the 'Debtors Reconciliation [Detail]'. The debtors reconciliation report compares the balance of debts as at the period end date with the amount outstanding in the trade debtor nominal account as stated in the balance sheet. Obviously there should be no imbalance nor any illogical or uncollectable values.
Then do the same on the creditors side. Look at the purchases register and check the open purchases. Are they all logical and genuinely due? Then display the report 'Creditors Reconciliation [Detail]'. Check through it and make sure you have sensible recent values and no out-of-balance figure. Will all these creditors all actually be paid?
You need to run through a report called the 'Vat Exceptions' report. Run it for both 'cash' and 'invoice' transactions. Examine all the transactions which look odd, highlighting them with the magnifying glass that appears when you move the mouse arrow over report.
When you are happy with the VAT Exceptions reports then you run the VAT [Detail] cashbook. Look at the individual lines and see if there is anything important that is missing. Check if any value looks odd or if there is a transaction that is falsely zero-rated. An obvious thing is your mileage will be in units of 40p. Therefore it is going to have to be a figure, which involves a round number of pence. Using the VAT [Detail] report, you might notice that you paid exactly the same payment twice within a few weeks of each other. This would be odd.
If you are on cash accounting make sure your VAT outstanding on your debtors and creditors looks roughly right. This in turn means that your debtors and creditors have to be correct overall. Any mis-invoiced sales have to be reversed or amended.
Then display the VAT Detail or the VAT Detail [Cash] report.
Then finally display the 'VAT Return' or 'VAT Return [cash]' report and print it. Fill out the VAT return, usually online. Keep a printed copy and file it with the VAT Detail Report.
Then amend the set-up preferences - go to 'Setup', 'Preferences', and 'Security'. Then and set the lock period forward to the end of the quarter that has just shut. This prevents you from making any amends on that closed quarter.

13. Bookkeeping for Expenses

Recovering Expenses through the AccountEdge Payroll System

There is often an error on the account where the balance owed to the staff appears. This control account is actually named 'Electronic Clearing Account'. Essentially it acts as a wages control account.

If this nominal account is not zero, do a reconciliation of the nominal ledger detail report. Please check that the amounts that you have paid the staff equal what the payroll system is saying that you have paid the staff. Tax declarations will be based on the latter. We need staff the payments to actually square to the payroll declaration.

Staff Wage Advances

You may issue advance wages or expense floats. Say you give a staff member £100. If you book this to 'wages' and you were subject to a PAYE investigation, they would expect to be able to recover Employer's National Insurance and PAYE from the amount paid. If you book floats as non-staff expenses, then you won't get the corporation tax relief because you haven't got a receipt to justify the expense that you've paid.

If you do have to issue an advance, then it is important that it is recovered, either from the staff payroll in the case of a wages advance, or from the expense return, in the case of an expense float.

So the only legal thing you can do is to book these floats and advances as staff loans. The account that we suggest you use is account number 1-7950. It is important that you keep this account clear to zero as much of the time as possible.

You have to recover the £100 from the advanced wage payment account 1-7950. Say you are using the AccountEdge payroll system. Before the wages are run for a month, then the card for the individual who has received the advance must be amended to include a new payroll type 'Already paid' in the deductions section of their payroll details. This will give a line in their payslip, which will allow you to deduct the amount that they have already received as an advance, free of tax and national insurance.

Let us say you have to recover a £100 given as a float to a member of staff. This was given to him/her to be able to afford some non-staff business expenses. This needs to be booked at the time that the receipts come back with the expense claim. The expense claim must be entered for the full value of the expenses that are being claimed, including the reasonable VAT. The recovery of the loan must be entered as a negative line in a 'Spend Money' payment for the individual receiving back the balance.

Say they claimed £126 worth of expenses, for which they'd already had the £100 expense float. You would enter the expense as a series of expense lines totalling £126. You then put in a negative line for £100 coded back to, say, 1-7940, to clear the outstanding float. The balance of £26 goes to the staff member as a balancing payment.

14. Staff Travel Expenses

The car mileage costs repay the costs of running your car. The company doesn't buy the car, the employee does.

If you haven't got one create a new nominal account for the car costs. We first need to check that this is a car that is being run by the employee. Normally for limited companies the tax-effective way of expensing a car is to pay 40p per mile under the fixed-profit car scheme. In the SAL standard template, mileages can be charged to account number 6-2100. The account name is Staff mileage. If your datafile features 'Travel Expenses' somewhere else in the expenses range, post the mileage charge to a new nominal account beside that instead.

Imagine you are either buying or leasing a car in the name of the business. Set up two new accounts - one for the asset for the car, and another for the expenses for the car. This should be held in a different account to travel expenses.

Inland Revenue Dispensation

Advanced notification of your expenses policy this to the Inland Revenue secures a dispensation which means that you no longer have to worry about P11Ds for these matters. 40p per mile more than covers the petrol cost. It is paid completely tax-free. You are, however, obliged to keep a record of your business mileage.

If you're recovering VAT on the mileage costs, you also need to keep VAT receipts of your petrol purchases. Strangely you don't use these receipts to match your actual VAT claims.

15. Capital Expenditure

Put all capital expenditure through an 'other expense' account at 9-7000. You simply disregard this cost in future as an asset. You might put assets on a list for insurance purposes. You can also keep a list in MYOB by keeping a record of all the account transactions in the relevant nominal account. Either way Simple Accounting Limited recommends against booking assets direct to your Balance Sheet.

This relates closely to the written down value per your capital allowances and your corporation tax calculation. If the Net Book Value (NBV) is deminim is (under £1,000) it can be written off in both your books and tax accounts..

During the year we may need to fix the fixed assets to the written down value (WDV in the corporation tax return) to shift to this policy. Obtain a copy of the last corporation tax return and the supporting calculation from your external accountant. You can reset the value of the assets to their WDV by entering extra depreciation by journal.

16. Stock

Items and Pricing

Item lists can help make your sales more systematic. You could shift to recording some of your basic pricing inside the customers' card. You could use the items list for services. If you get those meshing, then you don't have to remember all your prices by yourself as they are all recorded in the system.

Stock Counts by Bay or Shelf

If you have lots of stock it is useful to have the stock counts subdivided by shelf number in the various bays in which you're holding stock. Get the shelf numbers keyed into the items list. Then the stock-take itself doesn't become a massive job; deal with it shelf-by-shelf.

You can then run off the stock count sheet by location, bit by bit across the whole of the premises. Do the stock count and note down the amounts that are actually in stock for that particular location. Then you enter those counts via the 'Count Stock' routine.

When you're doing a write-off, it should be confirmed that the person responsible is happy. You enter the amount that you've got in stock as 'Counted', press the tab key, hit the 'Adjust Stock' button. The default write off account number is in the 5-xxxx range.

Stock Listing if You Have Lots of Stock

The way that you can look for stock can affect the way you enter codes. For example the Item List may not work effectively because the items are listed by item number.

The Item Register allows you to search for an item (rather than all items). You can then click on the down arrow to the right of the field where the item number goes. Then type in the first two of three letters of the item name. This list gives you all of the item names in strict alphabetical order, irrespective of item code. Pick one, and then this will allow you to view all the recent transactions made with that item number over the past months. This routine is more memory hungry.

Stock Type

You should move to having one custom list field used to identify the class of each line of stock. Another field can give the location of the basic stocks of each line.

Do You Have Lots of Inactive Stock codes

Take the inactive stock codes, prefix them with a 'Z' and turn them to inactive. You cannot delete them if there are stock transactions, which are still archived in the datafile.

However you can replicate them with new stock codes. Often you will want these to be the same as original code but with the 'I stock this item' box unchecked. You should then be able to reuse the code for item style purchases and sales.

17. VAT Treatment of Particular Classes of Expenses

You have to consider the VAT coding in MYOB in line with the way that the VAT Return is going to be composed. There are several common problems.

a) Misunderstanding the differences between Exempt, Zero rated and No Tax

It is important to be precise about the reason why a transaction doesn't bear VAT.

Code items zero only if they are:

public transport
certain forms of printing e.g. leaflets, books, magazines
children's clothes
raw food

Note that exports or imports outside the European Union are usually 'reverse charge' and so have to be coded with the ECP or ECS codes (see section 9 above).

If the purchase is from a business that is not VAT registered then the code is exempt.

If the cost is not one of those things then consider coding it as exempt. Examples include:I

air fares
bank charges
education
finance leases
insurance payments
interest receipts and payments
local authority taxes
parking charges
postage from the Royal Mail
rents (can also be standard)

Any other item within the UK is no Tax, if it has no bearing on VAT. This includes:

bank transfers
dividends
government grants received
national insurance
payments of tax,paye, national insurance, cis, vat, corporation tax to the HMRC
pensions
repayment of loans
salaries
wages

If you are a company you can only get the VAT back on compay vehilces if they are on contract hire - and even then the input tax is restricted to 50%. The maintenance of costs are fully allowable. If the car is owned by the employee then the mileage allowance is the only cost the company can legitimately pay the employee. Meanwhile for a sole trader or partnership you can get VAT on motor costs in proportion to the business proportion of the owner's use of the their car.

b) Entertaining and Subsistence are different

If you need to entertain a customer or a supplier then the VAT you incur is not allowable, code the item as 'E'. VAT cannot be claimed on entertaining at all. You therefore have to code all meals for suppliers and customers as exempt.

If you are away for a night to visit a client and you need to eat that is 'subsistence'. VAT on both of these is recoverable.

If you need to stay in a hotel that is 'accommodation'. The cost is usually allowable against corporation tax but may have to be declared on a P11d (see dispensations).

c) VAT on vehicle costs

d) VAT on Mileage Allowances/ business

Let's imagine you are not currently reclaiming VAT on mileage. Say the amount you are claiming is £0.40 per mile exempt. How much is that worth to your business? The answer is the corporation/ business tax relief and that is all. This 20% of £0.45 which is £0.09. The £0.45 covers petrol on which there is input VAT charged. The petrol will typically come to about £0.16 per mile and that £0.16 will have attracted VAT perhaps of £0.03.

Your business can increase your effective tax recovery up to £0.012 per mile simply by obeying the VAT regs and then putting in a reclaim on your VAT return. To get VAT back you should keep a mileage record, similar to the one you should keep anyway for the corporation tax. The VAT that you claim should be a reasonable proportion of the mileage allowance related to the petrol element only. You cannot get the VAT on other things like (for example) repairing an employee or director's car, services ,tax, depreciation, etc.

You also need to keep VAT receipts for your petrol. This is why people collect VAT receipts at garages. Just collect them, put them to one side. As long as they exceed the value of the claim you are fine. The simplest answer is therefore to code your mileage claims to reduced rate VAT code Reduced rate, not No Tax.

e) VAT coding

There are many occasions when clients simply miscode an expense. Have a look at this list for common errors.

An alphabetic list of VAT liability of specific expenses:

Air travel: Zero-rated
Hotel accommodation for employees usually standard
Businesses rates: No tax.
Bank Charges: Exempt
Bank Interest: Exempt
Business cars hired:
Christmas party: Standard rated.
Company cars bought from a VAT registered supplier: Exempt (the input VAT on company cars is disallowed).
Company car leases: for company cars half the input tax is reclaimable: 50%
Personal vehicles in partnership or sole trader 0%.
Company car expenses: Standard rated where appropriate (ie not vehicle excise duty,or insurance)
Company vans: Standard rated (import tax on vans is allowable).
Corporation tax payment: No tax.
Credit card bill - if the expenditure is booked separately and the payment is simply recharging of the credit card accounts: No Tax. Otherwise standard or exempt according to the nature of the individual transactions on the statement.
Credit card processing charge: Exempt (Hire of machine: Standard rated).
Entertainment for suppliers and customers: Exempt (the input VAT is not reclaimable).
EU sale goods sold to the EU unregistered per individual EU sale and you have to amend VAT charge manually in each sales invoice or receive money transaction.
Any purchase from an EU supplier on which the EU supplier has put VAT payable in their own country. For example a hotel bill paid in Germany zero rated
Services bought from the EU zero rated
Imports of goods bought from the EU:
Exports of goods sold to an EU registered business
EU sale goods sold to the EU unregistered per individual EU sale and you have to amend VAT charge manually in each sales invoice or receive money transaction
Goods bought from the EU; purchases of goods sold to an EU registered business.
Google Adwords: ECP and reallocate
Hotel accommodation for employees away on duty: usually standard
Import from an EU supplier on which the EU supplier has put VAT payable in their own country: (For example a hotel bill paid in Germany): No tax. If you are able to recover the foreign VAT then code as S when recovered.
Mileage allowance paid to employees driving their own car (usually 45p): Reduced rate.
Mileage in a company vehicle where the driver pays the petrol (this is equivalent to a standard allowance of 11 pence per mile): Standard rated on the 11 pence only.
National Insurance: No Tax.
Overtime: No Tax.
Pension payments: No Tax.
Petrol put into a pool car: Standard rate.
Petrol put into a company car: Standard rate but is subject to the VAT fuel scale charge
Refreshments bought for staff training day: Standard rated.
Salaries: No Tax
Export of services to un-registered businesses or individuals in the EU: Standard rate. Ensure card is not ticked 'EC Customer'
Export of goods to un-registered businesses or individuals in the EU: standard rated. Ensure card is not ticked 'EC Customer'
Import of services bought from the EU: ECP and reallocate.
Payments on the Visa card bill if the expenditure has already been analysed in AccountEdge the payment is simply payment of the credit card accounts balance - no tax. Otherwise standard or exempt according to the nature of the individual transactions
Subsistence (food bought for employees who are working away from their normal premises): Standard rate
Subsistence at a staff training event: usually Standard rate.
Public transport: Zero-rated
Payments of tax such as VAT: No Tax.
Wages: No Tax
Employer NI: No Tax
Insurance: Exempt
Transfers between bank accounts: No tax
Interest exempt
Finance charges exempt
Public transport zero-rated
Mileage allowance paid to employees driving their own car (usually 40p) reduced rate
Staff leaving party standard rated

Run the reports and check in roughly the order I give below. This will get the data file sorted out prior to management accounts being prepared.

Company Data Auditor

Firstly, I would run the Company Data Auditor. This tells you things like when the datafile was last verified. It also warns you when you last reconciled the bank accounts.

The next stage of the Company Data Auditor is the data exception review. This checks issues like whether the list of outstanding sales invoices agrees to the nominal ledger control account for debtors. Where it finds an error, it puts up a red question mark and invites you to inspect the report.

Procedure for period ends

For management account or the year-end, the first priority (as always) is to do the bank reconciliation.

Secondly when this is done you go to 'Index to report' and then run the sales Debtors Reconciliation [Detail]. The Debtors Reconciliation report compares the balance of debts as at the year-end date and amount outstanding in the debtor's nominal account as stated in the balance sheet. Obviously there should be no imbalance. Then examine other Debtors reports. Debtor day's report is quite revealing. You can find this under 'Sales', 'Customer payments'.

Thirdly, we do the same on the creditors' side. Look at the purchases register and check the open purchases. Then display the report 'Creditors Reconciliation [Detail]'. Check through it and make sure you have sensible recent values and no out of balance figure.

When you have checked through these stages, I would run the balance sheet. I would hit 'Analyse', 'Balance sheet', and then Filters'. Set 'this year and last year', and make the selected period the quarter-end. See if there are any values or changes which seem unreasonable.

When you have finished doing the reviews of the balance sheet, then review the Profit and Loss account in a similar way.

Fixed and Variable Costs

Costs are either pure fixed (as in the case of rent, rates, mortgage interest), semi-fixed (as in the case of labour advertising) or variable (as in the case of subcontracted labour, costs of goods sold, and postage). If you want to analyse these in detail then split them by nominal account. This would require you to split items with more than one element into separate nominals (e.g. temporary manual labour go in one nominal, regular salaries go into another nominal). This would be simpler than a transaction-level analysis.

Budget Report

The MYOB report you need is in 'Reports', 'Accounts', 'Profit and Loss', and 'Budget Analysis'. Make the report cumulative from the beginning of the year through to the end of the current quarter. Hit 'Report Fields' and remove the percent difference key. Go to Finishing', leave 'Rounding' blank. Hit 'Include Account Numbers' and hit 'Include Zero Balances'.

Drop this into one of the standard management accounts spreadsheets that we can devise for your accounts structure and send to you. This will update the figures for the past quarter. Open the template Excel spreadsheet to compile your management accounts.

I suggest that you then do a review with your directors against the budget. If necessary, either reset the budget or reconsider the entries that have been made, or take whatever decisions arise from the figures!

18. Building Industry

Retentions Treatment

When you charge your sale, the total amount of income includes the retention. When you agree to a retention then you are also agreeing to claim that retention later. It is a debtor for the duration.

The original sales invoice therefore has a line for the retention. It should deduct the retention as a new debtor nominal account. The point at which you eventually claim the retention back off the client is when the debt clears with a new sale.

The retention is only a debtor to the tune of the amount of the retention on the original invoice. If the retention subsequently varies then it is only the amount that was on the original invoice that gets credited to the retention debtor account. Any difference is either extra income or extra cost.

The key is to put in each recovery of each retention in as an advanced sale invoice.

There are two reasons for this:

You make sure that you are correctly billing off the amounts you have allowed to be charged against your previous sales as retentions. The values there are all reconciled. It is clear the amounts you are deducting are equal to the charges you are eventually going to make.
By putting them in as an advanced sale, you are also forcing yourself to reconsider at some point in the future when the retention is actually going to be paid.

Eventually you have to claim the retention from the client. If you have further snagging work to do, you can postdate the invoice once again. If the value is different you can amend the invoice. But bear in mind you must not amend the line that goes to the debtor retention account. You just put in an ancillary cost of sales line, so the debtor retention eventually clears. If you get a retention against a firm that has gone bust then you have got to credit the retention debtor by means of a credit note, perhaps at your year end.

Holding the retention debtor account at Nil

This is the key to operating this system generally. Operate the retention debtor control account on a nil basis. To operate this procedure please put in advanced sales so that the retention debtor eventually works its way back down to nil again. The huge advantage of this procedure is that it requires no subsidiary records, spreadsheets or reconciliations.

To check that you do actually issue the retention invoice you need an additional procedure. You need to get used to printing your invoices through the sales ledger, using the print email invoice option. This is below the sales register on the sales ledger. If you go into advanced filters and leave the unprinted box ticked and then print, the system gives you a review sales before delivery box. If any of the sales invoices there are retentions you can then decide whether or not to print or post them or whether to amend them.

Say you booked it in as a sale of £100,000 (net of VAT) less 5%. The retention debt is £5000. Say the retention was not fully claimable. Let's say after the work is finally certified you can only claim £3500 of that £5000 retention. You still have to raise an invoice to clear the debt of £5000. You also have to put in a credit to cost of sales for the £1500 difference for the loss on the retention.

Therefore, raise a sales invoice for £3,500. The first line of £5,000 is posted as a credit to the retentions account/debtor. The second line of £1,500 is debited to costs of sale. That way the original £5,000 is as cleared from the retention debtors, but the reclaim is only £3,500. £5,000 is posted as a credit to the retention account, so the retention debtor is returned to nil.

19. Dividends

Dividends

If you are going to be taking out money from the firm you must get it approved by the company, or it could be regarded as remuneration.

Board minutes protect you from any accusation from the Inland Revenue that dividend payments are either remuneration or director beneficial loans. I would like to refer you to the part of the Simple Accounting Ltd website which talks about dividends. Dividends Webpage

During the year book any dividends into an account under 'Other Expenses'. When it comes to the year end you tot up the contents of that 9 account for the whole year.

Let us say during the year you have paid yourself twelve lots of £1000. That's £12,000 which you debited to the Dividends Account and charged (credited) to the bank.

Dividends Minutes

So, run off a Profit and Loss report for your Board meeting. You can do that electronically as a PDF, so you end up with a soft report that you can reproduce at any time. You can email it which gives it a date. You cannot lose it like you can a piece of paper. Perhaps you do both.

As you have stripped the dividend, the P&L should show an operating profit of at least £12,000. You can use the £12,000 profit as a justification for the Board minutes that you draw up. You could use the template that exists on my Resources section on my website http://www.simpleaccounting.co.uk/resources/

You take draft dividends minutes and tax certificate off my website. Make sure you get these filled in, http://www.simpleaccounting.co.uk/resources/

The dividend that is agreed might not be £12,000. You might decide you have done well and you are actually going to award yourself £14,000. You can pay yourself the extra £2,000 immediately after the year end.

We now need another journal that takes the dividends not as paid but as approved by the Board meeting. Say on the 31 March 2009 you post a journal for £14,000. You debit the dividends account with the £14,000, credit the liability account with the £14,000. The difference between the £12,000 journalled over initially and the £14,000 that you have just approved is owed to you. It is therefore correctly shown as a liability in Directors' Loans Account.

The minutes for your dividend need to say that you can withdraw the dividend as the cashflow of the company allows.

If you don't feel happy doing all this, we can do that together at the year end but I generally have to visit you for you to hold a Board meeting with us as a minuted attender.

20. Management Accounts

Run the reports and check in roughly the order I give below. This will get the data file sorted out prior to management accounts being prepared.

Company Data Auditor

Firstly, I would run the Company Data Auditor. This tells you things like when the datafile was last verified. It also warns you when you last reconciled the bank accounts.

Procedure for period ends

For management account or the year-end, the first priority (as always) is to do the bank reconciliation.

When you have finished doing the reviews of the balance sheet, then review the Profit and Loss account in a similar way.

Fixed and Variable Costs

Budget Report

21. Before Year End

How we operate

Simple Accounting Limited operates in a different way relative to other external accountants. Most external accountants create their own set of books on specialist final accounts and tax calculation software. These effectively duplicate the cashbook and the purchase and sales ledger daybooks that are kept locally by a client on MYOB.

That is not the way we operate. Instead, everything is squared, even the books themselves. MYOB has to be right, and verifiable. The balance sheet and the profit and loss account that comes out of MYOB has to be justifiable, line by line. All these exact trial balances are used in the final accounts. There are no separate year-end figures as every year-end adjustment is squared back in the MYOB system. At the year-end, therefore, we want a balance sheet that has been worked jointly by you and us. We need each of the lines to be verified externally.

Accruals

I suggest that accruals are generally limited to one hundred pounds per month or more. You can enter these using 'Record Journal Entry'. Post the bill, when it arrives, to the accrued account in the liabilities. If you avoid doing accruals then the profit and loss report turns into an account which is more like a cashflow report.

Company Year End

Ensure that your Companies House registration states your correct year-end. You can formally alter this if it is currently stated as something else. A midmonth date is an inconvenient date to administer for VAT, Corporation Tax calculation and the MYOB system.

Year End File

When you come to the year end, our standard practice is to create a year-end file. This is a paper record for the future. You put all the calculations that you have made relating to the year end in one single place. You print off the Balance Sheet and the Profit & Loss from MYOB to then show them to the external accountant.

You can collect copies of the various things we use in the year end file for the forthcoming year end. Put them in a year end folder that I started off for you? Put copies of the following:

Bank Statements at year end date
Debtors Reconciliation [Detail]
Creditors Reconciliation [Detail]
Photocopies of bills accrued or prepaid
Dividend minutes
Copy HP agreement
Lease agreements and any of the other notes
PAYE year end statement
Listing of assets bought

Put an up-to-date copy of the employers' liability certificate in the audit file. We also need evidence of who you are for anti- laundering checks.

The resulting file is particularly useful if you change your accountant, sell your business or suffer a tax investigation.

You must get the VAT Annual Accounting return photocopied, even if it was returned on-line. Put a copy of the reconciliation on the main bank account as at the year end.

Provisions for Year-end

You need to consider if provisions must be made for capital expenditure between now and the end of the year.

22. At Year End

How we operate

Accruals

I suggest that accruals are generally limited to one hundred pounds per month or more. You can enter these using 'Record Journal Entry'. If the accrual is for something that is not going to recur at next year end, such as a work in progress cost, then post the net cost of the bill, when it arrives, to the accrued account in the liabilities (2.7xxx in our standard setup). Otherwise charge the bill into the relevant P&L account (usually 6.xxxx). If you avoid doing accruals then the profit and loss report turns into an account which is more like a cashflow report. This tends to be more useful for a small business manager.

Company Year End

Ensure that your Companies House registration states your correct year-end. You can formally alter this at Companies House, if it is currently stated as something else. A midmonth date is an inconvenient date to administer for VAT, Corporation Tax calculation and the MYOB system. Companies house forms

Year End File

You can collect copies of the various things we use in the year end file for the forthcoming year end. Put them in a year end folder. Put copies of the following:

Bank Statements at year end date
Debtors Reconciliation [Detail]
Creditors Reconciliation [Detail]
Photocopies of bills accrued or prepaid
Dividend minutes
Copy HP agreement
Lease agreements and any of the other notes
PAYE year end statement
Listing of assets bought

The last VAT Accounting return photocopied, even if it was returned on-line. Copy of the MYOB reconciliation on the main bank account as at the year end.

Put an up-to-date copy of the employers' liability certificate in the audit file. We also need evidence of your identity for anti- laundering checks. The resulting file is particularly useful if you change your accountant, sell your business or suffer a tax investigation.

Provisions for Year-end

You need to estimate provision for corporation tax for the year. Book this as a journal Debit 9.6000 and Credit 2.6200. Date this on the last day of the year.

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MYOB and AccountEdge - Tricks of the Trade

Contents

1. Introduction

2. Navigation

To enter AccountEdge

Desktop Icons

Navigation within AccountEdge

Backup and Verification

3. Banking

Spend Money

Undeposited Funds

Bank Statements

Bank Reconciliation: Simple Method

Bank Reconciliation: Full Method

Interest Received other than at the year end.

Transfer between a Current Account and a Linked Deposit Accounts

Transfer between bank accounts

Money received to the wrong firm

Recurring Transactions

4. Credit Cards & Loans

Paying off Credit Card Bill

Bank Statements for Loans

Intercompany loans

HP

5. Sales

Emailing a sales order acknowlegement in the appropriate format

FRM Files

Customised Stationery

Orders: a caution

Summary Recording Proforma Invoices

Back Orders

Sales Cash Receipts using a Takings Sheet

Vouchers

Time Billing: informal

Time Billing: formal

Changing the Format of Delivery Notes

Grant Income

Statement Customisation

Reconciliation- Keeping the Sales Register Clear

Sales Orders

Recurring Sales

6. Purchases

Manual Purchase Ledger

Reimbursing Expenses using Job Codes

Recurring Purchases

Payment Terms

Use Purchase orders to track your stock needs

Leases

7. VAT Bookkeeping

VAT Cashbook

Recurring VAT Journal

Closing the VAT period end

Conclusion

8. VAT Schemes

Accrued Accounting

Cash Accounting

Annual Accounting

Annual Accounting cashflow advantage

Choice of VAT scheme for simple accounting

9. Preparing a Backdated VAT Return

10. VAT for Imports and Exports on Mamut AccountEdge and MYOB v11

A) Imports/ Purchases

Notes:

B) Exports/ Sales

C) Services or Goods on which foreign VAT has been imposed

EC Sales List

Export of Goods

Export of Goods

11. VAT EC Sales list and Intrastat

A) EC Sales list

B) EC Intrastat

Intrastat

Misunderstanding the EU customer and the EU supplier on the sales and purchases cards

Intrastat

EC Sales List

Export of Goods

Export of Goods

12. Vat Procedure for Period Ends

13. Bookkeeping for Expenses

Recovering Expenses through the AccountEdge Payroll System