According to HMRC rules, VAT on all invoices should be based on the full price. Suppliers must account for VAT on the amount they actually receive, and Customers can recover the amount of VAT that is actually paid. As such, a Credit Note is automatically generated for any Settlement Discount value and allocated to the invoice and payment so that VAT is correctly accounted without the need for manual adjustments. More information with examples is available; see How To… » VAT on Settlement Discounts.

The term Allocation is used to describe the process of matching related transactions. For example: a payment to the invoices to which it relates; a credit note against the invoice for which it was raised.

Each time an Allocation is made, a transaction record is created for both sides of the Allocation. Corrections do the same but sign of the value will be reversed.

The action of allocating Payments to Invoices occurs in both the Sales and Purchase Ledgers. The process is the same in both ledgers.

This enables you to select the Customer account for which you wish to process allocations.

Here you should set criteria to locate transactions that have already been allocated for a selected account. You can enter a date range to limit the transactions retrieved. The date range filter will be applied to Invoices and Credit Adjustments only: all Payments, Credit Notes and Debit Adjustments will be shown.

When you have entered the selection details, click Display. The Allocations Allocate list window opens containing the unallocated transactions that match the selection criteria that you have entered.

You can Print the Allocation History report. This lists all the allocations that have been made in the selected Period or Year, to all Customers or just the Customer entered.

When selected, a Print Output window will open so that you can select the print medium: Screen; Printer; File etc.

The report will be in Home values but for Currency accounts, there is an option to Show Currency Details. When the report includes Currency details it is best printed in Landscape format; open the Page setup menu to check the print setup.

A history of all the allocation and corrections that relate to a Purchase Ledger transaction is retained.

Each group of transactions has a unique Allocation Reference so it is possible to report on which transactions have been allocated together.

Allocation of transactions enables the Aged Creditor reports to give a truer picture of the position for any period.

The Allocation History is a report showing the transactions that have already been allocated for a selected account. You can enter a date range to limit the transactions retrieved.

Allocation History can also be viewed from the Enquiry windows.

The basic operation of allocating is to select Payment and Invoice transactions that are to be matched against each other.

Select Line/ Select All - When you have selected the Transactions that you wish to Allocate, clicking OK allocates the full Outstanding value of every Transaction displayed. However this will not necessarily provide a zero Allocation Balance, and therefore further manual Allocating may be necessary.

Allocate - This contains the Allocated Amount for the currently highlighted Transaction line. This will be the Transaction amount, less any Settlement Discount, or it may be entered directly. If a Currency account is being allocated then the values will be shown in the currency. However, if the Any Currency box has been ticked on the account record, the transactions may be in any currency. Partial Allocation is allowed for Currency Accounts.

Allocated Value - If you cannot achieve a zero balance by selecting complete transactions, you can adjust one of the amounts in the Allocated Value field to make the balance zero. This is referred to as a partial allocation of the transaction and the difference in the allocated value and the transaction value will remain outstanding and unallocated. If you wish to part Allocate an entry, then highlight the line required, and manually type in the amount then press tab.

Allocation Balance - The total of all Invoices allocated, less all Receipts/Payments and Credit Notes allocated. This must balance to zero before you can update, unless a Currency Account is involved.

*Disputed - This is used to put an Invoice on Query or if it is on Query already (marked with an *) to take it off Query.

Outstanding Balance - The total of all Invoice amounts outstanding, less all Receipts/Payments and Credit Notes outstanding.

Allocates all of the Payments, Credit Notes and Debit Adjustments to an equal value of Invoices or Credit Adjustments, starting at the top of the list and working down until the Allocation Balance is zero.

If the Account being processed is for a currency Supplier, the window will have an extra menu, from which you can select whether to Allocate Transactions for the Home Currency (e.g. £), any of the Foreign Currencies being used and shown (e.g. USD) or All, the default.

Note: The Allocations of Transactions for multiple currencies are based on home values only. If currency Allocation is required, it must be with all elements of the Allocation in the same currency.

If you are using the Correction option then only Transactions previously Allocated will be displayed.

To toggle the Allocation status of a single Transaction highlight the line in the list and double click.

Opens the Allocations Allocate search window.

This enables you to select the Supplier account for which you wish to process allocations.

Also from this window you can Print the Allocation History report. This lists all the allocations that have been made in the selected Period or Year, to all Suppliers or just the Supplier entered.

Allocation correction reverses the allocation process.

Both allocations and corrections can be tracked using the Allocation History report that can be printed from the selection window.

If a cheque is returned by the bank after it has been allocated against an invoice, you will have to: