Any transaction that has VAT or Tax on it should be going through the sub ledgers, such as AP and AR and not directly entered into the GL as a journal.
Below is a list of points that should be considered highlighting the issues that may be faced if the choice is to still use journals to capture VAT.
- Not possible to determine if it is a sale or purchase (credit) so cannot be used easily for any allocations or VAT returns
- There are no determining factors on a journal for the tax engine to work so the tax is 100% manual
- Tax has to be entered and calculated in a certain way or risk accidental posting to a VAT account but not reporting it causing reconciliation issues
- Not linked to any recovery rates so all AP accounts have to be manually overwritten
- No Security so can choose a tax rate from a regime that is not linked to the LE/OU and so whilst calculated would not be reported
- importing journals from ADI can be difficult if the tax is required
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