How to process a bank transaction refund – for purchase item

You may post some purchase transactions directly through the bank as “Money Out” items.  If the item has VAT included, the correct code for “Input VAT” will be used on the transaction and pulled through to the VAT return.  Should you need to process a sales refund through as a bank transaction, the software will class this as “Money In” and therefore use the “Output VAT” code which would be incorrect.

To process a bank transaction for a purchase refund you would need to do this as a credit note, example:

Bank Account£300.00 
Purchase Code £250.00
Output VAT £50.00


If you have already entered the refund into the bank account by mistake coded as “Output VAT” you should be able to delete the transaction and follow the steps above to correct.  If this transaction has incorrect been included on a VAT return and submitted to HMRC, you will be able to correct this by creating two separate journals as shown in the example below.  This will show on the next VAT return as reversing the initial mistake, and re-entering the correct one.

You will need to select the category as “VAT Journal” and ensure the journal is dated within that VAT period.

Journal one:

Output VAT£50.00 
Purchase Code£250.00 
Suspense Account £300.00


Journal two:

Suspense Account£300.00 
Purchase VAT £50.00
Sales Code £250.00



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