I sometimes need to refund or part-refund customers. I'm not talking about regular customers who we invoice and who have an account on the Customers window in Sage, I'm talking about members of the public who buy a product and end up asking for some or all of their money back, and who we'll probably never deal with again. The refund Wizard only seems to deal with refunds to regular customers whose company names have been entered into Sage.
(This gives the right totals, but is not "seen" by the VAT Wizard, one reason I haven't been using the Wizard. Come VAT return time, I do another journal to transfer the £2 from Sales VAT to VAT Liability.)
Another possibility I have played with is doing a bank payment, tax code T1, from Paypal account 1295 into Sales 4000. The problem is that if you do this the VAT Wizard treats the VAT as making Box 4, Purchase VAT, bigger by £2, when what I want it to do is make Box 1, Sales VAT, smaller by £2.
What do other people do in this situation? I'm hoping there is a nice easy button marked "cash refunds" that I have missed!
-- Edited by chatcat on Tuesday 24th of July 2012 12:22:28 PM
When clients of mine have a paypal account, I set this up as a bank account in Sage (1200 to 1250 range) so when an issue like this happens you just treat it as a regular bank payment
Thank you for your reply, Mark. That's sort of what I was thinking of doing - I do have Paypal set up as a bank account even though I've given it the code 1295, outside the 1200 to 1250 range. However the VAT does seem to come up as an increased Purchase VAT rather than a decreased Sales VAT.
Perhaps that doesn't matter! I can see that it all ends up with the same VAT Liability total in the end.
It's just that I'm sure my Teach Yourself Accounting book said you were meant to treat a sales return as a decrease in output VAT rather than an increase in input VAT, i.e. restoring the situation to what it would have been if the sale had never happened in the first place. It worries me that I am claiming for purchase VAT when I didn't actually purchase anything.
But I could be worrying about an immaterial distinction.
Yes to be absolutely correct it should be shown as a reduction is sales & output vat and do an adjustment at the vat return period end. But in practise I am not sure how many would actually do this
