Advance payment on the cash register - how to correctly enter it?

It often happens that taxpayers who have cash registers do not realize that the advances, deposits, etc., which they receive from their clients, should be confiscated, colloquially speaking "cash on the cash register". This particularly applies to companies whose activity consists in providing services to natural persons who do not conduct business activity. Check how correctly the advance payment on the cash register should be entered! Answer in the article!

It should be remembered that the fiscal receipt is the basic proof that documents the sale transaction for natural persons and flat-rate farmers. For such a group of customers, upon their request, an invoice must be issued, however, it should be remembered that such a transaction must also be recorded at the cash register. Then the fiscal receipt is attached to the copy of the invoice, which remains in the issuer's accounting documentation.

Advance payment at the cash register - the moment of recognition

For many entrepreneurs, however, the problem is the moment of recognizing the advance payment, when they will receive it for the future delivery of goods or provision of a service. Pursuant to Article 19a para. 1 of the VAT Act, the tax obligation for the supply of goods and the provision of services arises upon the release of the goods or the performance of the service, and thus the sale must be recorded at the cash register.

If, however, before the delivery of the goods or the performance of the service, part of the payment was received (e.g. advance payment, down payment, prepayment), the tax obligation pursuant to Art. 19a paragraph. 8 of the VAT Act is created upon its receipt.

The impact of advances on the bank account

And what if the entrepreneur receives an advance payment to the bank account on November 31, 2020, and notices this fact only on the next day, i.e. on December 1, 2020?

Unfortunately, registration at the cash register cannot be made retrospectively. The problem arises when the registration will have to be done in the next settlement period. Regardless of this, if such a situation occurs, the value of the advance should be immediately recognized in the cash register.

In this case, on 01/12/2020, because on that day the entrepreneur learned about the payment to the account. The above-mentioned impact on the account should, however, be actually recognized in the month when the tax obligation arises (in this case, 11/2020). Hence, the transaction should be reclassified to the period it relates to, and from the periodic report for December - the advance payment should be subtracted from the total value (in order to avoid double taxation of the same activity). It should be remembered that the advance payment is not included in the income tax at the time of its receipt, only it affects the VAT. For income tax purposes, it will only be settled during the period of the transaction.

In summary, advances should not be treated as a separate taxable part. It is closely related to the delivery of goods / performance of the service for which the prepayment has been made. The legislator only specified a different moment when the tax obligation arises than in the case of a sale in which there are no advance payments.

Example 1.

On December 31, 2020, an advance payment of PLN 500 was made to the entrepreneur's bank account, paid by a natural person not conducting business activity. Unfortunately, the entrepreneur noticed it only on 01/01/2021. How should he proceed?

The received advance payment should be made into the cash register immediately. Then, when the entrepreneur books the combined periodic report for December 2020, he should increase it by the value of the advance payment made in January 2021 (because the tax obligation will arise on the date of its receipt, i.e. December 31, 2020) and when he will book the combined periodic report for January 2021, he should reduce it for the value of the advance made in January 2021.