Preparing accounts when VAT is on Cash Received basis

[Tweety]

Hi,

I was wondering if somebody could explain how to properly prepare Accounts when VAT is on Cash Received Basis. I understand that the Accounts should show the sales for the year rather than the cash received. If preparing accounts from incomplete records, should the Debtors figure at the end of the year be debited to Debtors and Credited to the sales?
If this is the case, what happens at the start of the following year as the cash received for that year will include debtors amounts from previous year - are these amounts then deducted from the cash receipts/sales for that year?

Thank you.

 

[J.Ryan]

Dr Debtors
Cr Sales

and reverse in the new year

 

[Kluivert]

In order to calculate you need to know three things.

Mr. Ryan has given you the simple version.

Get your OPENING DEBTORS.

Get your CUSTOMER CASH RECEIPTS.

Get your CLOSING DEBTORS.

Formula is: OP Debtors + Receipts - CL Debtors = Gross Sales.

All items in Accounts are exclusive of vat so you need to take Vat Out of Gross Sales.

Formula is: Gross Sales / 1.21 = Nett Sales.