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How to process a bank transaction refund – for sale item

You may post some sales transactions directly through the bank as “Money In” items.  If the item has VAT included, the correct code for “Output 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 Out” and therefore use the “Input VAT” code which would be incorrect.

To process a bank transaction for a sales refund you would need to do this as a journal entry, example:

 DebitCredit
Sales Code£166.67 
Output VAT£33.33 
Bank Account £200.00
 £200.00£200.00

 

If you have already entered the refund into the bank account by mistake coded as “Input 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.

You will need to select the category as “VAT Journal” to create these journals.

Journal one:

 DebitCredit
Suspense Account£200.00 
Input VAT £33.33
Sales Code £166.67
 £200.00£200.00

 

Journal two:

 DebitCredit
Output VAT£33.33 
Sales Code£166.67 
Suspense Account £200.00
 £200.00£200.00

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