General Ledger

Dynamics 365 Business Central – How I post opening balances for reducing balance Fixed Assets

Gavin Whittaker4 Comments

Introduction

When posting opening balances for reducing balance assets things can sometimes prove a little challenging.

In this post, I’ll walk through how I post opening balances for reducing balance assets, and the best practices I follow.

In this example I’m posting opening balances for a reducing balance asset as at 31/08/23 in the financial year 2023.

Step 1 – Create a close the previous Financial Year

When creating a new company in Business Central its common to only create the financial year you are posting opening balances for. However, when posting opening balances for fixed assets that have a depreciation method of “Reducing-Balance”, I’ve found a slightly different approach is needed. In such cases, I also create the preceding year and then close it.

Therefore, for my example, I go to “Accounting Periods” and ensure the previous financial year has been created and also closed. I’m posting the opening balance for 2023 so I’ve also created the year 2022 and closed it.

Step 2 – Depreciation Book Setup

The next thing to do is to ensure the option “Use Accounting Period” is off in the Depreciation Setup and also switch off the GL Integration.

**I’ve already posted the opening position for the Asset Cost and Accumulated Depreciation in the General Ledger so I switch off GL Integration

Step 3 – Post the opening balance as at the end of 2022

As reducing balance depreciation is calculated on the carrying amount of the asset at the start of the financial year, you must post the opening balance at the end of the previous financial year, regardless of when you are going live with Business Central.

The asset in my example has an original cost of £9838.71 as at 30/09/2014, with accumulated depreciation as at the 31/08/2023 of £7,757.61.

However in order to post this correctly, and have the system create the correct depreciation, I need to post the depreciation at the end of 2022 which is £7526.38, giving a carrying amount (Net Book Value) as at the beginning of 2023 of £2312.33.

I’ll then post the depreciation for January through to August separately, to get the exact opening position of £2,081.13.

I therefore enter a Fixed Assets Journal as per below ensuring to use the original place in service date for the Opening Cost and the end of the previous financial year for the accumulated depreciation to give me the correct Net Book Value.

Step 4 – Run Depreciation and Check the Amount

After posting the opening entries, I then run the Calculate Depreciation job with a date of 31/01/2023 and this gives me depreciation of £28.90, which is exactly what I was looking for 🙂

I then run the depreciation for January through to August as per below to get the opening position as pf the end of August.

Conclusion

The main takeaways are to create the previous financial year and close it, and also post the opening cost using the assets original place in service date, and post the depreciation on the last day of the previous financial year.

Thanks for reading!

Need help with Business Central? Contact me 🙂

Dynamics 365 Business Central – How to setup and configure Postponed VAT in the UK

Gavin Whittaker2 Comments

Introduction

When you import goods into the UK, you have to pay VAT if the goods are over a certain amount. You can either pay this immediately, and then reclaim it later on your VAT return, or declare and recover on the same VAT return, using the postponed VAT method.

This post goes through how to setup Business Central if you use the Postponed VAT scheme. I’ll then post a journal to record the Postponed VAT and show it on the newly configured VAT statement.

VAT Product Posting Group

The first thing to do is to configure a new VAT Product Posting Group. I’ve created one below called “PVAFULL” with a description of “Postponed VAT”

VAT Posting Setup

I then add the new VAT Product Posting Group into the “VAT Posting Setup” as per below. The key thing to note is that is set as 100% VAT and the VAT Calculation Type is “FULL VAT”

VAT Statement Configuration

The final thing to do is to add the new combination to the VAT Statement so any transactions posted to the PVAFULL posting group are recorded on the VAT return.

With postponed VAT you both declare this in Box 1 of the VAT return as an amount due, and also in Box 4 as an amount owed.

Therefore the VAT Statement is configured as per below

In the first and second step I add the new VAT combination to the detail of the report, and then in the third and fourth steps I included the added lines in the Box 1 and Box 4 calculations.

Test by posting a Postponed VAT Journal

Now to test the configuration I’ll post a VAT only journal for Postponed VAT as per below

This gives the following GL entries which give a net effect of nil in the GL.

We also get the following VAT entry which is picked up the VAT statement.

Now when I test the VAT Statement I can see the £1000.00 amount appearing in both Box 1 and Box 4 and the amount owing to HMRC in Box 5 is £0.00

Conclusion

I hope this post helps anyone who needs to configure Business Central to work with Postponed VAT. As always please ensure you test thoroughly before implementing and then submitting the VAT return.

Thanks for reading!

Need help with Business Central? Contact me

Dynamics 365 Business Central – Write off overpayments and underpayments using Payment Tolerance

Gavin Whittaker5 Comments

Introduction

There may be occasions when customers overpay or underpay a particular invoice, and you’d like to write off the amount rather than leave it on their account. In this blog, I’ll walk through how you can automatically write off amounts when entering Cash Receipts using a Payment Tolerance. First, I’ll explain an underpayment write-off, followed by an overpayment write-off.

Setup

The setup for Payment Tolerance is located in the General Ledger Setup page.

The “Payment tolerance % amount” is the default amount that can be written off an invoice. Therefore, for example, if you had an invoice for £100.00, the default you could write off would be £0.10. (as we’ll see below this is a suggestion that can be over written when applying)

The Max. Payment Tolerance Amount is the maximum you’ll allow to be written off an invoice.

Finally, you also need to setup the Payment Tolerance General Ledger codes in the Customer Posting Group.

Under Payment Scenario

In this first scenario, we have a Sales Invoice for £100.00, but we have only received £98.00, and we wish to write off the £2.00.

The cash receipt is created for £98.00 as per below:

I then click “Process > Apply Entries” and find and apply the cash receipt to the invoice.

Once in the apply screen I can see the £100.00 and the Max Payment Tolerance has defaulted to £0.10 as per my setup. (this is 10% of the Sales Invoice Total)

Next I change this to 2.00 and then click “Process > Set Applies-to ID”

Now, when I click OK, I’m presented with the following message:

The default is “Leave a Remaining Amount?” however I change this to “Post the Balance as a Payment Tolerance?” and click “Yes”.

Now, when I preview the postings, I can see amounts being recorded in the Payment Tolerance GL accounts to account for the Payment Tolerance in the General Ledger. Additionally, there are Detailed Customer Ledger Entries to rectify the remaining amount on the Sales Invoice.

The General Ledger entries have an extra entry for the £2.00 underpayment, which is recorded as an expense. (i.e. a Debit amount)

There is also an extra detailed ledger entry to correct the remaining amount on the Sales Invoice

Over Payment Scenario

In the second scenario, we have a Sales Invoice for £100.00, and we have received £102.00. Instead of returning the £2.00 or leaving it on account, we opt to write off the £2.00 using payment tolerance.

Again we create a Cash Receipt for £102.00 as per below:

We then find the Sales Invoice and change the Payment Tolerance to £2.00 and select “Set Applies-to ID”

Again, we are prompted with the payment tolerance warning so select “Post the Balance as a Payment Tolerance?” and click “Yes”.

This posts additional General Ledger Entries for the £2.00 overpayment, but this time crediting the tolerance account. (as this is additional Income)

We also get additional Detail Customer Entries to correct the amount remaining on the Payment

Taking Payment Tolerance on Posted Documents

In the previous examples we walked through the process of applying the Payment Tolerance while posting the Cash Receipt. Now, let’s consider a scenario where the Cash Receipt has already been posted, and we aim to apply it to an invoice while also considering a payment tolerance.

Below is a posted sales invoice and a posted cash receipt. The sales invoice is for £100.00 and the cash receipt is £98.00. We will now apply them together and take the payment tolerance rather than leave £2.00 outstanding on the invoice.

First I go to “Customer Ledger Entries” and highlight the Cash Receipt and select “Process > Apply Entries”

Next I change the “Max Payment Tolerance” amount to £2.00 and click “Process > Set Applies-to ID”

I then click “Process > Post Application” and click OK

I’m then presented with the option of how to deal with the Payment Tolerance.

I select “Post the Balance as Payment Tolerance” and click “Yes” and the entries are posted and both documents will show an amount remaining of £0.00.

Conclusion

As you can see, the payment tolerance feature can be incredibly useful for writing off amounts when applying cash receipts.

If you encounter numerous instances of underpayments and overpayments, leveraging this functionality eliminates the need for manually entering adjustments to clear these minor sums.

Thanks for reading!

Need help with Business Central? Contact us