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Z
zac-zenzyc-io
May 14, 2023
Question

VAT - totals are showing as exclusive even though VAT is set as inclusive. (for all vat rates and all transactions). Does the cash/accrual status affect this?

  • May 14, 2023
  • 1 reply
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1 reply

JessT
JessT
May 14, 2023

Hi Zac,

 

Can you please explain further how your VAT appears as exclusive instead of inclusive? Which section in QBO did you notice this? For example purposes, when you create an invoice for 100 pounds with 20% S VAT Inclusive, do you get 20 or 16.67 for VAT?

 

The accounting method used (Accrual or Cash) has nothing to do with whether the tax is inclusive or exclusive. It covers the entire transaction. The Accrual method reports income, expenses, and VAT whether a transaction is paid or not. Whereas, the Cash method only reports them when there's a payment. You can refer to this article: Choose between cash and accrual accounting methods in reports.

 

Feel free to go back to this thread if you have other questions in mind. Have a good one!

Z
zac-zenzyc-ioAuthor
May 14, 2023

Hello Jess,

thanks for your email.

All my transaction amounts show up as exclusive in the P&L, B/S, etc.  So, my accounts are completely wrong. 

 

This is the case for all VAT rates, and all transactions.  The only transactions which show up at the correct amount are the ones without any VAT (ie, exempt or no vat). 

The 'default' is set to inclusive, and each transaction is also set to 'inclusive'.

 

Changing these selections to 'exclusive' makes no difference.  Surely changing this to 'exclusive' should make a difference? 

 

I didn't see why accruals/cash would affect the exclusive/inclusive aspect either.  I was grasping at straws for an explanation.

 

And NONE of your 6 QBO colleagues who responded yesterday bothered themselves to suggest an explanation: all of them just gave inane euphemisms for 'PFO'. 

 

Do you have any suggestions for why the VAT isn't being accurately treated in QBO?

 

MichelleBh
MichelleBh
May 15, 2023

I value how hard you worked and how much time you took to fix the reporting problems, Zac. Our team is committed to giving you the best experience possible and will do everything we can to make things right.

 

I've replicated the scenario, and I'll explain why the results of your Profit & Loss (P&L) and Balance Sheet reports are like that. This will help you understand it better. 

 

I agree that Cash and Accrual have nothing to do with whether the tax is included or not on your reports.

 

Usually, this will happen depending on your tax setup. The VAT isn't included in the P&L report as it is a liability ( Inclusive or Exclusive). If your tax is not a Flat Rate Scheme, the taxes amount will show in the P&L as the fixed amount without taxes. Then what is in the Balance Sheet is the breakdown of taxes under Liability.

 

See the sample screenshots for more guidance: 

 

However, if your tax has a Flat Rate Scheme, it shows the same amount in both accounts if filtered as Inclusive. But if Exclusive, the VAT rate will break down in the P&L report. Please note that FRS does not apply to all businesses. See the sample screenshots for more reference: 

 

I've got here some resources that provide in-depth details about dealing with the Flat Rate Scheme:

 

 

However, read the sections on how to adjust your VAT liability, what occurs after you make a VAT adjustment, and critical factors to remember: 

 

 

Please let me know if you have any other questions regarding this. I'm happy to share more information. Be safe. 

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