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Thread: Processing an Inventory/Stock Supplier Invoice from a Non VAT Vendor

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    Processing an Inventory/Stock Supplier Invoice from a Non VAT Vendor

    Hi,

    I would like the opinion of members from the forum on the following scenario.

    Buying stock from a non-VAT vendor into your company which is a VAT-vendor, where you sell the Stock. The Stock/Inventory Items in the system are all VATable items, so when you sell these VAT will be raised. (This implies that a full inventory module in present in the system being used)

    But now how would one approach the entries (GRVing) of these items when you process it to a computerised system, and where you are working with a latest cost scenario.

    Indicating on the GRV processing that the line item purchased is non-VATable is fine to balance your source document to the system at the point of processing, but what effect should this have on the latest cost of the item you are purchasing (in the stock master)? Would you change the latest cost to the value you paid the non-vat vendor and therefor if you look at the stock master your cost inclusive would be whatever you paid plus the 14%/VAT rate at that point in time?

    This scenario is based on any system where you process the Supplier invoice, not using direct journal entries.

    Any comments/suggestion/opinions welcome.

    Regards
    Marius

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    Diamond Member Neville Bailey's Avatar
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    Assuming the non-VAT vendor supplied the stock to you at R100.00, then your last cost value would be R100.00, just as it would be if a VAT vendor supplied the stock to you at R100.00 plus VAT, as stock is valued in the balance sheet as VAT exclusive.

    I'm not sure why your system indicates a "cost inclusive" value, as I don't see the point of such a valuation of stock. A "cost inclusive" value would only be applicable in the supplier's account, as that is what you would owe them.
    Neville Bailey - Sage Pastel Accounting Consultant
    www.accountingsoftwaresupport.co.za
    neville@accountingsoftwaresupport.co.za
    IronTree Online Solutions

    "Give every person more in use value than you take from them in cash value."
    WALLACE WATTLES (1860-1911)

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    mariusjl (17-Feb-12)

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    Thanks Neville,

    What you say makes absolute sense.

    The "cost inclusive" value I am referring to is purely an indicative value on screen, and does not effect the BS at all.

    What had me going on this one, is the fact that I setup my Stock Items as VATable items, and this setting is then used when processing GRV's, but I can see now that the correct way would be to combine a setting from your Supplier Master (indicating whether the Supplier is a VAT vendor or not) in addition to the setting of the Stock Items.

    Regards
    Marius

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