Standard Operating Procedure (SOP): Passing VAT Reconciliation Journal in ERPNext

Frequency: Monthly (Before 20th of every month)
Purpose: To reconcile Input VAT and Output VAT and pass a VAT Payable journal entry in compliance with Tanzanian VAT regulations.

1. Pre-Requisites

• Ensure all sales and purchase invoices for the month are submitted and approved.
• Output VAT and Input VAT accounts are correctly set in Sales Taxes and Charges Templates and Purchase Taxes and Charges Templates.

2. Accounts Used

• Input VAT Account: e.g., Input VAT - A
• Output VAT Account: e.g., Output VAT - A
• VAT Payable Account: e.g., VAT Payable - A

3. Procedure

Step 1: Generate VAT Report

1. Go to Accounts > Reports > General Ledger.
2. Filter by:
   • Posting Date: First to last day of the month.
   • Accounts: Input VAT and Output VAT.
3. Note the balances:
   • Output VAT: VAT collected from customers.
   • Input VAT: VAT paid to suppliers.

Step 2: Calculate VAT Payable

• VAT Payable = Output VAT – Input VAT
• If Input VAT > Output VAT, you have a VAT Credit.

Step 3: Create Journal Entry

1. Go to Accounts > Journal Entry > New.

2. Fill in:

   • Posting Date: Last day of the month.
   • Company: Your company in Tanzania.

3. Add Accounts:

   • Debit Input VAT Account with Input VAT amount.
   • Credit Output VAT Account with Output VAT amount.
   • Balance the difference to VAT Payable Account.

   Example:

   Account	Debit (TZS)	Credit (TZS)
   2100 - Input VAT	1,000,000
   2300 - VAT Payable		500,000
   2200 - Output VAT		1,500,000

4. Save and Submit the Journal Entry.

4. Post-Reconciliation (Payment via Journal Entry)

1. Obtain GEPG Control Number from TRA portal.

   • This will be used as the Reference No.
   • The date the control number was generated will be the Reference Date.

2. Go to Accounts > Journal Entry > New.

3. Fill in:

   • Posting Date: Date of generating the control number.
   • Reference Number: GEPG Control Number.
   • Reference Date: Date of control number generation.

4. Add Accounts:

   • Debit VAT Payable Account (e.g., 2300 - VAT Payable - TZS) with the amount payable.
   • Credit Bank Account (e.g., 1000 - CRDB Bank - TZS) with the same amount.

   Example:

   Account	Debit (TZS)	Credit (TZS)
   2300 - VAT Payable	500,000
   1000 - CRDB Bank		500,000

5. Save and Submit the Journal Entry.

6. Attach GEPG payment proof or receipt in the Journal Entry for audit trail.

5. Compliance

• Journal must be posted and VAT paid by 20th of every month.
• Archive VAT reports and Journal Entry PDF for audit.