Practical example recording advance payments: Spanish legislation

Sage Active allows you to easily record all journal entries related to advanced payments that took place before the creation of the invoice they are related to.

These advance payments can be recorded for payments from your customers as well as for payments owed to your suppliers.

In this article you will find a practical example for recording the advance payment amount excluding tax on the advance payment ledger account. This demonstrates recording the journal entries and also registering the amounts for tax returns and open items.

The example describes a customer recording an advance payment of 600€ for an invoice with a total amount of 1210€ (21% VAT).

This happens as follows:

• After receiving the 600€ in your bank account, you record the advance payment reception.
• At the agreed date, you record the invoice with the total amount of 1210€.
• After receiving the remaining amount for the invoice, you record it in your bank account.

The journal entries for each of these steps are described below.

Recording payment of the advance payment amount

Recording the journal entry for the payment of the advance payment amount starts in the usual way:

1. Create a new financial journal entry.

   Accounting > Journal entries

2. Add and complete the first entry line using the amount received from the customer and a Bank or Cash ledger account.
3. Add the second entry line and select the Customer advance payment ledger account.
4. If the advance payment ledger account is not configured with a Tax code, choose a Tax and Tax treatment from the side panel.
   The split in taxable amount and VAT amount happens automatically.
5. Select a Third party for the advance payment entry line.
6. Save the journal entry.

The resulting journal entry looks like this:

The VAT amount for the advance payment is registered in the tax return for the month you record the advance payment in.

Recording the invoice

Recording the journal entry for the invoice with advance payment starts in the usual way:

1. Create a new invoice journal entry.

   Accounting > Journal entries

2. Choose a Revenue ledger account for the first entry line.
3. If the revenue ledger account is not configured with a Tax code, choose a Tax and Tax treatment from the side panel.
   The chosen Tax and Tax treatment must be the same as used for the advance payment.
4. Add the taxable amount for the invoice to the revenue entry line.
   The VAT entry line is recalculated accordingly.
5. Add an entry line for the Customer advance payment ledger account.
6. If the advance payment ledger account is not configured with a Tax code, choose a Tax and Tax treatment from the side panel.
   The chosen Tax and Tax treatment must be the same as used for the advance payment.
7. Select a Third party for the advance payment entry line.
8. Change the amount for the advance payment entry line to the taxable amount of the advance payment.
9. Change the amount for the advance payment VAT entry line to the VAT amount of the advance payment.
10. Add an entry line for the Customer account and add the Third party.
    The amount will balance automatically.
11. Save the journal entry.

The resulting journal entry looks like this:

The VAT amount in the tax return takes into account the VAT amount already registered for the advance payment. The resulting VAT amount is registered in the tax return for the month you record the invoice in.

Recording the invoice payment

The journal entry for the payment of the remaining amount for the invoice can be recorded and matched like a standard financial journal entry.