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SMBOwner
Level 1

Record Prepaid Expense in QBO Including VAT

Hi,

I need to record prepaid expenses and then accrue them, for example monthly. I've searched the database but cannot find details of the VAT treatment.

 

1. On the date of paying the bill, I record a journal entry, crediting the bank account for the full amount and debiting a prepaid expenses account for the full amount. The question here is, should I record the VAT code (5% on purchases) in none, one, or both of these journal entries?

 

2. When I allocate the prepayment, I create another journal entry crediting the amount from the prepaid expenses and debiting the relevant expense account. The question, again, is whether the VAT code field should be used in this entry.