How to Book VAT for Separate Bank Fee Transactions

Sometimes, bank charges may appear separately in the bank statement, with the fee amount shown in one line and the VAT on the fee in another. To record these charges as a bank expense and account for the associated VAT, you can follow these steps to ensure proper registration.

Example for Explanation:

First Transaction: SAR 100 (fee amount without VAT).

Second Transaction: SAR 15 (VAT on the fee).

Step 1: Concept Explanation

When handling each transaction, VAT should be included in the total amount. Here’s how to calculate and record the VAT for each transaction:

VAT on the first transaction (SAR 100):

Calculate VAT using the following formula:

This formula helps extract the VAT amount when it is included in the total amount.

VAT on the second transaction (SAR 15):

Calculate VAT as follows:

In this case, treat the amount as part of the expense, as it cannot be directly categorized as VAT from the bank screen.

Total recorded VAT:

Add the VAT amount for each transaction: 13.04 + 1.96 = SAR 15.

This result means that by treating each line of bank fees as an expense that includes VAT, the correct amounts for VAT and expenses are recorded, making it easy to match with the bank statement.

Step 2: Summary of System Registration Steps

Go to the "Bank Accounts" section:

Click on "Statement Transactions" from the specified bank to access financial transactions such as bank fees and their respective VAT, as illustrated in the example above.

Consider each transaction as VAT-inclusive:

• When processing each transaction, ensure that the VAT is included in the total amount.
• In the bank screen, under "Statement Transactions," classify each transaction as "Bank Charges."
• Choose the correct VAT rate after classifying the transactions in the bank screen.

By following these steps, you will ensure the accurate recording of bank fees and VAT, achieving full compliance with accounting requirements.