How journal entries affect the VAT Return

What you need to know

You use journal entries when you want to move values from one ledger account to another. By default, journals do not appear on the VAT return.

However, you can include VAT on your journals and report them on the VAT return, if required.

Include a journal on a VAT return

When you enter the journal, choose the check box in the Include VAT Return column.

Each line of the journal uses the VAT Rate set on the selected ledger account. Each ledger account has its own VAT Rate.

Read more about setting VAT Rates on ledger accounts

How the journal affects the VAT return

The following table explains which box on the VAT return updates after entering a journal. This is determines by a combination of the ledger account and whether the journal line is a debit or credit.

Ledger Account	Default Nominal Code	Credit or Debit	Affects the VAT Return
VAT on sales	2200	Credit	Increases Box 1
VAT on sales	2200	Debit	Decreases Box 1
VAT on purchases	2201	Credit	Decreases Box 4
VAT on purchases	2201	Debit	Increases Box 4
Any other ledger account		Credit	No effect
* Any other ledger account		Debit	No effect