VAT posted into the same account as revenue or expense is VAT that's easy to misstate. You'll only find it when the return doesn't agree with the books. Ledgestra keeps tax visible from the moment an invoice is posted.
Tax codes, set up once
Each tax code has a code (for example VAT-OUT-20), a name, a rate and a type: output for sales or input for purchases. It's linked to the GL account its tax should post to. Codes can be deactivated without deleting their history.
Split automatically at posting
When an invoice carries a tax code and a tax amount, posting splits it into three lines instead of two:
| Customer invoice (AR) | Debit | Credit |
|---|---|---|
| Receivable | Full amount | |
| Revenue | Net of tax | |
| Output VAT account | Tax amount |
Supplier invoices mirror this: expense net of tax and input VAT are debited, and the payable is credited for the full amount. The VAT sits in its own account from day one, for every invoice, however it was posted.
If a tax code has no GL account configured, Ledgestra doesn't guess one. The invoice posts without the split, and the setup gap stays visible so it can be fixed.
Proving the numbers before you file
- VAT Detail lists every sales and purchase invoice carrying tax in the period, with its tax code, counterparty and amount.
- VAT Reconciliation compares, for each tax code, the tax invoiced against the balance actually posted to that code's GL account.
When those two agree, the return is backed by the ledger. When they don't, you find out before filing, not during an audit.
The payoff
Output VAT, input VAT and the net position each sit in their own account. Close gets faster, returns become easier to prepare, and the tax figures stay traceable back to individual invoices.