I am in the process of entering opening balances by creating invoices for the amounts outstanding (dated in the previous financial year) and allocating them to the Retained Earnings account.

Should I treat them as normal invoices for VAT purposes (i.e. Sale of Goods or Services to UK Customer) or Out of Scope for VAT?

I use the accrual method for VAT returns.

Some of these opening balances are for miniscule amounts where customers have underpaid by a few pence and will probably never be settled if, for instance, the customer is no longer trading.

What is the best way to deal with them?

Hi Stuart,

You should set the VAT Treatment to 'Sale of Goods or Services to UK Customer'. However, after you have set up the customer balances, you should go to the Accounts list set the correct opening balance for the VAT Liability account (ie. VAT you had collected in the previous year but not yet paid to HMRC).

If you don't expect the invoice to be paid, you can write it off as follows: After you have set up all the other customer balances, increase the Accounts Receivable opening balance by the outstanding amount of the invoices you want to write off. Then record a General Transaction for that amount from the Accounts Receivable account to the Bad Debts Expense account.

Regards,

Thanks for the as always quick reply Mark.

I also have some opening supplier balances where we have:

a) been due credit but not received a credit note because the supplier is no longer in business

b) have paid in advance in the pre-conversion year (last year) for goods/services which were not received until this year, e.g. monthly payments for gas/electricity which were made last year but the actual bill reflecting them was not issued until this year.

What method should I use to account for this please?

Hi Stuart,

a) Don't create a credit note in Solar Accounts. Instead, after you have set up the supplier balances decrease the opening balance of the Accounts Payable by the amount of the credit. Then create a General Transaction from the Accounts Payable account to the Bad Debts Expense account.

b) Create a purchase credit note dated in the previous year with the Account set to 'Cheque Account' and VAT Treatment set to 'Out of Scope'. Later, you can allocate the credit to a purchase invoice.

Regards,

I created the purchase credit notes as suggested above but find that they show in the Reconcile Bank Statement window for the cheque account (and presumably will until I receive purchase invoices and allocate these credits to them).

Am I able to reconcile the rest of the transactions even though the bank balance in the window does not match that on my bank statement?

Hi Stuart,

After you create the purchase credit notes, go to the Accounts list and set the opening balance of the Cheque Account to match your bank statement for the start of your financial year. (This date is after the date on your purchase credit notes). Then go to the bank reconciliation window and tick the purchase credit notes to mark them as reconciled - you should now find that the Bank Balance column matches the opening balance you entered for the cheque account.

Regards