Clive Murphy Ltd.

Simple VAT Bookkeeping - Invoice Basis

This approach is a more complicated option than cash accounting, but there are circumstances when it would be advantageous. Cash accounting tracks money when you actually receive and pay it, whereas invoice-basis accounting tracks invoices, regardless of when or even whether they have been paid. Using cash accounting gives you an accurate picture of how much cash you have, whereas the invoice basis can give you a clearer picture of sales. For example, if you make a lot of sales in a given month, but don't collect the money, the invoice accounting method will make it seem like you have a lot of money, when a lot of it is still owed to you and not yet available to spend. On the other hand, with cash accounting you can receive a lot of money in a given month from previous months sales, making it look like you made a lot of money and hiding the fact that perhaps, in that month, your sales were lower than usual. Talk with your accountant to see what makes sense for your business.

Additional Information

If you are going to use invoice-basis VAT book-keeping, VT Cash Book is a free program offered by VT Software that can be used to track the day to day transactions of your business.

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