Hi, could someone please provide me with a bit of guidance on how to account for Applications for Payment?
When you issue an Application for Payment to a customer, do you actually show that entry on your sales ledger whilst awaiting payment? I'm not sure on this as part of me is thinking not as it isn't a tax document as the VAT is only accounted for once payment is received, so can you add these to your sales ledger and chase applications as overdue debt. I'm not sure as my thought process on this is that it's recognised as WIP in your balance sheet instead and then only accounted for on your sales ledger once the tax point has been confirmed.
However when monitoring your outstanding customer balances, you wouldn't want to ignore any Applications, but not having them posted on your sales ledger could open up that risk. So do we just account for them without VAT and possibly using a different numbering system of the invoices so that we know they are applications, and then once the payment is received account for the VAT only at that point?
When you issue an Application for Payment to a customer, do you actually show that entry on your sales ledger whilst awaiting payment? I'm not sure on this as part of me is thinking not as it isn't a tax document as the VAT is only accounted for once payment is received, so can you add these to your sales ledger and chase applications as overdue debt. I'm not sure as my thought process on this is that it's recognised as WIP in your balance sheet instead and then only accounted for on your sales ledger once the tax point has been confirmed.
However when monitoring your outstanding customer balances, you wouldn't want to ignore any Applications, but not having them posted on your sales ledger could open up that risk. So do we just account for them without VAT and possibly using a different numbering system of the invoices so that we know they are applications, and then once the payment is received account for the VAT only at that point?