Sometimes we will physically receive a cheque back from a supplier either as a result of a refund or a rebate/discount allowed and the following paragraphs explain what the correct VAT treatment should be.
The goods/services were defective/not received or there was an overcharge on the invoice
In these cases the money should be accompanied by a credit note that will be processed through the Accounts Payable module. The money received should be recorded in Accounts Receivable module against the same account codes as the credit note, i.e. the original expenditure code. This should be given the same VAT code as original invoice.
There was an overpayment
In this scenario we may not receive a credit note as it is probably a processing error on our part. In this case a debit note will be raised by the Accounts Payable team and processed through the Accounts Payable module. The money received should be recorded in the Accounts Receivable module against the same expenditure account codes as the debit note, using the same tax code as the original invoice.
They have given us a rebate/discount on our purchases
In this scenario the money is processed in the Accounts Receivable module only. This is coded to the same source of funds that is used for expenditure but it uses the transaction code LLAA (Discounts taken) or LLAC (Rebate on drugs purchases). The tax code 'O/S- Outside the Scope' should be used.