Cloud Accounting

The reconciliation depends on which VAT scheme you use, so we will look at each one in turn.

Standard invoice based accounting scheme
The balance on your VAT control account at the end of the VAT period should be the same as the balance to be paid or refunded on your VAT return.

You can claim inputs dated within the VAT quarter so you may wish to claim these from late arriving invoices that were too late to be included in the return. This will be an element of the reconciliation for the current quarter and the next, as they will be included in the VAT return but will have been claimed on the previous.

If you have differences which need to be investigated run the input/output report and compare that to the transaction listing – maybe there is a misdated transaction or a VAT coding error.

Cash based accounting scheme
The basis of this return is VATable items, cash book receipts and payments that are matched in the VAT period, with the exception of purchases from the EC which are to be included as if they were in the standard invoicing scheme i.e. dated in the VAT quarter. Note that these do not affect the VAT amount of the return. Cash received or paid not allocated to customers or suppliers (unallocated cash) is also included.

To reconcile the balance, identify the VAT element of sales and purchase invoices still outstanding or partially outstanding at the end of the VAT period (i.e. not yet matched) (aged Debtor and Aged Creditor reports in Prelude give this) + the balance on the VAT return. Note that you will need to adjust for VAT included in Unallocated Cash.
Check for differences in the same way as the invoicing scheme.

Flat rate scheme
This scheme is based on a flat rate percentage being applied to the outputs including VAT whereas the invoices are raised at the standard rate. Inputs (with exceptions) are ignored for the VAT return.

Differences to be reconciled may be because of inputs wrongly coded but the differences due to the scheme operation will be written off to profit by the software, and should be clear. Check for differences in the same way as the invoicing scheme.

Margin Schemes
Providing transactions are coded correctly the balance at the end of the VAT period should agree to the VAT control account. Separate VAT codes are recommended for margin elements and non-margin elements. Check for differences in the same way as the invoicing scheme.

Retail Schemes
When required these will be included.

Reverse charges
Should have no impact on the reconciliation, but be aware of them.

Purpose:
To save time and reduce errors. Note: this is only a guide and you may have to adapt it to suit the various banks formats.

Preparation:

1. Ensure opening bank balance on statement agrees with opening balance on Bank Reconciliation – if different
   identify differences and post to ledgers until difference = nil.
2. Download bank statement from bank as csv or excel (if excel you will need to save it as a csv when you finish working with it before importing.
3. Have aged debtors list, remittances, aged creditors and nominal code list to hand plus anything else you may need.

Processing:

1. Open the CSV/Excel file – this is a Lloyds format

Columns C, D and H can be ignored – in Column I use ‘=If( F2>0, F2*-1,G2)’ and auto fill down then copy and paste special Column I into Column J. In a preformed spreadsheet

where I2 contains the formula

Copy and paste the bank export into columns A to H and copy the formula in I down and copy & paste special into J. You will then need to identify all of the items – by ledger and account – and calculate the VAT where appropriate.

In the import file – first time only the columns will be Date (A) = 1
Bank (K) = 11
Description (E) = 5
Reference (B) = 2
Ledger (L) = 12
Account (M) =13
VAT Code (N) =14
Gross Amount(J) = 10
VAT Amount (0) = 15
Whilst this may seem onerous – once set up it will only take a couple of minutes to copy the exported file into the template spreadsheet and do the autofill and copying – what will take time (whatever way you do it) will be the columns L to O.

Paying a Subcontractor with a CIS (Construction Industry Scheme) Deduction.

Create a new Nominal Ledger Balance Sheet account called CIS as shown below.

Post the payment as normal – Nominal Payment which will be for the full amount (including CIS Deduction) to subcontract labour Nominal code, e.g. PU02. If the subcontractor is not registered for VAT, then use VAT Code N.
This will now have overstated the amount paid to the subcontractor, so the next step is to post a Nominal Receipt to e.g. CL08 for the tax deducted – ensure you use the same reference and date in order to match them on the bank reconciliation.

If you process a subcontractor’s invoice through the purchase ledger then post the invoice in full coding the VAT either as standard (If VAT shown) or as VAT Code N (if no VAT). Depending on the Subcontractor’s status raise a credit note for the CIS deduction due and post the amount or CIS Deductions due – e.g. CL08.

Use the subcontractor’s UTR/CIS number as a reference.

You need to be aware of the VAT implications for the margin scheme for buying and selling used cars. read up ALL the VAT notices – the notes below are only a guidance.

New cars include VAT on all accessories as well as the car itself. There is no VAT chargeable on finance charges, road fund licenses or grants towards electric cars.

Second hand cars purchased include VAT – irrespective of whether you raise a VAT invoice or not. The costs of refurbishing, repairing, valeting etc are not to be included in the costs. You can, however, reclaim VAT back on purchases of spares at the time of purchase .

Second hand cars are to be held in a book stock. The Prelude product system will allow this but there will ever be only one transaction in and out.

The sales of the vehicles will be included in the VAT return as sales and output tax and the part exchanges and purchases of second hand cars as an offset of sales and input tax. – see FAQ – VAT Margin Scheme.

Feel free to contact Prelude Software Ltd for guidance on how to operate the scheme within the software.

Before you commence any data entry, it is vital that you give due consideration to the following, and then choose one of the suggested methods that best suits your situation.

Points to consider
How much information do you need to transfer from the existing system and do you intend to continue to use the existing system in parallel until it is fully matched. This will determine the next step in the treatment of opening balances. There are three scenarios
– Transfer just the opening balances at a point in time.
– Transfer all outstanding transactions to allow queries to be dealt with and to produce detailed statements for customers.
– Transfer a quantity of history to enable the existing system to be shelved.

Nominal Ledger Opening Balances only
All opening balances should be posted as journals, found in Adjustments>Accounting Adjustments>Standard Journals.
Before using one of the suggested methods, first ensure the following:
– The nominal ledger structure and control accounts are set to your requirements.
– All nominal ledger accounts have been created.
– Check whether the bank balances agree to those on the bank statement – and whether any outstanding items will affect the opening balances e.g. Items on the statement not yet posted.

Method 1 (Ideal scenario).
It’s the start of a new financial year and you have a full trial balance and list of debtors and creditors. Important: Use the first day of the new financial year as the accounting date throughout the posting of the opening balance – See Set Accounting Date.
Post opening sales ledger balances to the individual customer accounts in the sales ledger either as individual Invoices – Post the gross amount as VAT code N and code the nominal to XXXX – Suspense account or alternatively just post 1 Invoice for the total amount outstanding – with narrative as ‘Opening Balance’ and again post the gross amount to suspense .
In the same way post opening purchase ledger balances to the individual supplier accounts in the purchase ledger, either as individual Invoices or alternatively just post 1 Invoice for the total amount outstanding and analyse each entry to the nominal ledger suspense account XXXX.
Finally, post the nominal ledger opening balances from the trial balance, but do not post the total debtors & creditors balances to the control accounts, instead, post them to the suspense account. This is because these entries have already been made automatically by virtue of posting the opening sales and purchase ledger balances. The suspense account balance should now be zero.
Always keep printouts of opening debtors, creditors and trial balance.

Method 2
You have a full trial balance and a list of debtors and creditors but it is not at the start of a new financial year. Follow the procedures in Method 1 but use the first convenient day to date the opening balances.

Method 3
It’s the start of a new financial year and you have a list of debtors, creditors, reconciled cash book balances, V.A.T., etc.but a full trial balance is not yet available.
Post sales and purchase ledger balances as described in Method 1, and journal opening bank and V.A.T. balance, posting the total of the remaining nominal ledger balances to the suspense account.
If, at a later time, you can obtain a full opening trial balance, you can post the remaining nominal ledger balances, the balances already entered should be posted to the suspense account. The accumulated totals to date should now be correct and the suspense account balance zero. When you receive the opening trial balance, remember to first check that the stated debtors, creditors, bank, V.A.T. and any other balances, agree with those you actually entered as opening balances. If they do not, find out why and make the necessary adjustments. If you do not, then the suspense account balance will not return to zero and your accounts will not be correct.
If you do not have opening balances when you wish to start using Prelude raise invoices etc and post – you will be able to enter your opening balances later (see Method 1 above)- but when you do ensure you use dates prior to the first entries you made.

EC Sales Lists are quarterly statistical submissions to HMRC – either on a paper form or through the VAT website.

There are only a few fields to complete for each EC customer you have sold to in the last quarter. These EC customers must be resident in an EC Country and must supply you with their VAT Registration Number. It should be shown on their invoices – but isn’t always. The VAT number should be recorded in the customer’s account and should be prefixed with the country code.

The customer’s VAT number must be shown on the invoice as well as your company’s VAT number. You may have to amend the invoice layout to accommodate this.

The information for the EC Sales List is –

• Country Code
• Customer VAT number
• Net Sales to that customer
• Transaction type = e.g. 0 – Goods 3 – Services (you may need to research The VAT website if you supply other than these types to get the right code)

The sales for the quarter can be obtained from the Reports menu > Sales daybook listing. Put in date range, export this to excel, sort by VAT code (whatever VAT code you decided on in customer preferences for EC sales) and then by customer and sum each customer’s sales.

Then run the customer list, export to Excel and sort by VAT number to obtain the VAT numbers.

Complete the EC Sales list, submit and retain a copy. The total of the sales list should equate to box 8 on your VAT return or if different quarter end dates, should be reconcilable.

There are occasions when applications have a lot to do and sometimes the network thinks it should have finished and aborts the operation and this can be very frustrating.

This break in operation is often caused by ‘Timeouts’. In some software timeouts can be controlled by the user – particularly if you are working on sensitive information and you are called away from the PC – a timeout will kick in to save your information (or not – depending on how the software is written).

Sometimes there is a dip in the power or a surge and these can cause an application to crash as can other network overload or sending/retrieving issues.

Whilst these cannot be entirely prevented Prelude Software Ltd have done as much as we can to minimise the effect by constantly saving your work to keep loss of data and re-entry needs as little as possible.

Examples of this is the bank reconciliation and cash book imports where there are many transactions being processed without the user saving.

Cash Book Import now allows resume from an incomplete import due to a connection timeout or a suspended import (you can now suspend, which saves details and closes the form).

After a timeout or suspend, when you next start an import, you will first be asked whether to resume with this data or to delete the data and start afresh with a new import.

Your free account has been set up and is ready for you to log in with the username and password both set as your ICPA member number.

The ICPA will have advised you of your member number. If you don’t know it, please contact The ICPA as we don’t hold your member details, only the member number, which will be an alphanumeric code in a form similar to ABC123 with all letters in uppercase.

Your password is case sensitive and so must be entered with uppercase letters, otherwise your log in attempt will fail.

When you log in for the first time, the software will invite you to change your password. We advise you to change your password to something that is secure and memorable to you.

A password strength indicator is displayed on the log-in and password pages but is not enforced by the software. You must ensure appropriate password strength.

The accountant creates and manages his clients’ Prelude databases in his Client Manager.

• He controls whether each client can access their own Prelude database.
• Set database to ‘Client Access’ mode and advise the client of user details.
• He can access all the databases from Client Manager.
• Each client can access only their database, as they only have user details for their own database.
• Each database has muti-user access, the same as any other website.

Therefore the answer is yes – easily.

If you can’t log in the first time, you should check caps-lock and number-lock and try again and take your time.

If you can’t log in the second time, you should check that you are entering the correct details. If in doubt use the ‘forgotten password‘ link under the log in.

If you fail a third time, assuming you have used the same (correct) username each time, your account will be disabled for 30 minutes, then automatically enabled.

This is a necessary measure to protect the platform from repeated false login attempts.