[OMOS knowledge puzzle] – General ledger entries of invoices received after the VAT submission deadline

General ledger entries of invoices received after the VAT submission deadline.

One of the most common mistakes in financial statements are the general ledger entries of invoices in the wrong reporting period since the deadline for submitting VAT (January 20) has passed. The above represents a violation of one of the most important accounting principles – the occurrence of events, which requires that the effects of transactions and other events be recognized when they occur.

An additional reason for this error is the fact that invoices are issued with multiple dates, most often: “invoice date“, “delivery date” and “issue date“. From the accounting point of view, the “delivery date” is relevant, and the resulting transaction should be recorded in the reporting period to which the delivery of goods or service provision refers.

What to do if the deadline for submitting VAT has passed?

When the deadline for submitting VAT has passed, and invoices from the previous reporting period arrive subsequently, it is not correct to record the above as an expense of the current period. The cost should be recorded in the correct reporting period – the one to which it refers:

• trade liabilities (credit); cost (debit), unrecognized VAT (debit) – if the supplier recorded the same in December (which was required according to tax regulations)
• accrued expenses (credit); cost (debit) – if the supplier recorded it in January (which is incorrect according to tax regulations). The accrued expense will be “balanced” by recording the invoice in the current period.

Exceptionally, if the invoice has been received after the financial statements have been drawn up, the invoice should be recorded as “subsequently determined cost of the previous year” and only if the amount is not materially significant where “CFRS 3 – Accounting policies, changes in accounting estimates, errors” requires a different treatment, which entails correcting the income tax return (PD form).

In both cases, VAT will be recognized in the current period in which the difference has been determined, that is, the VAT form for December of the previous year will not be corrected.