Advance Statements – Expense Reimbursement Reports as one of the most frequently used Russian localization features for Dynamics NAV 2017

When you perform the international roll-out to Russia, one of the most frequently used accounting processes you will face is a compensation of expense reimbursement reports, provided by employees to their company. Company hands out its employees some amounts of money (either cash or bank card transfer), with a task to spend this money on behalf of company’s name. The employee returns supporting documents to the company, justifying that the money has been spent in a proper way (e.g., receipts, tickets, or other defined documents). The supporting documents are summarized in so-called Expense Reimbursement Report (or, Advance Statement, as it is called in localized version of Dynamics NAV – mainly because the employee tends to get the money in advance from the company, and only then spent them). It is a statutory defined printform, and represents itself a sort of Purchase Order, which is a bit different from a normal Purchase Order. This document can be found in Payables part of the Financial Management menu:

The source tables for the Expense Reimbursement Report are basically the same as for the Purchase Order, but the Page is different. The header of the page is generally simplified in comparison with a normal purchase order, and contains the Employee ID. Employee ID is taken from a separate reference, which should be filled with the employees and needed posting groups (no VAT for VAT Posting Group). The table behind the Employee is the same as the Vendor table, but the records are created with a different type and also a separate number of series is used. So, the employee is acting as a vendor for the company, but a specific one:

There are two schemes of booking of Expense Reimbursement Reports: with VAT and without VAT.
In most cases, employee is brining just the supporting documents such as receipts. In this case he had paid the VAT to the vendor as a physical person during the purchase and this VAT is not anymore reimbursable (e.g., employee bought an office chair for 118 Euro, including 18% VAT of 18 Euro). There would be the following transactions booked:

Dt (Purchasing Account) for 119 Euro

Cr (Employee Payable Account) for 118 Euro

For this type of process, accountant needs to create a new Expense Reimbursement Report, selecting Employee as a Vendor in the header of the document, and in the lines select the needed purchasing type (G/L Account or an Item). The posting of this document would generate the abovementioned accounting transactions:

Then company will compensate the expense to the employee by pain him when he will form and sign the Expense Reimbursement Report and return the receipt to the company:

Dt (Employee Payable Account) for 118 Euro

Cr (Bank Account) For 118 Euro

The other case happens when employee tells the Vendor that he is actually acting not as a physical person when making this purchase, but he is acting on behalf of the company (and has a power of attorney to represent the company). In this case employee will demand a VAT invoice from the Vendor and will bring it to the company in addition to the documents, mentioned in the first case. This would allow the company to book VAT for this transaction and later on reimburse it from the government in the end of the reporting period. There is a need to post the following transactions in Dynamics NAV system:

Dt (Purchasing Account) for 100 Euro

Dt (Purchasing VAT Account) for 18 Euro

Cr (Employee Payable Account) for 118 Euro

The difficulty here is that this 18 Euro should be booked to the VAT account with all the details of the initial Vendor, but not with the employee details. Later on those details should be submitted to the tax office during the VAT reimbursement process. So, how to generate those transactions? Here the Russian localization takes place, and the transactions in the end a bit different then just mentioned.

First, based on the VAT invoice, the company creates and posts a normal Purchase Invoice for this Vendor. It allows to generate needed VAT transactions, but creates excessive payables transactions (as employee already paid the Vendor):

Dt (Purchasing Account) for 100 Euro

Dt (Purchasing VAT Account) for 18 Euro

Cr (Vendor Payable Account) for 118 Euro

So, how to deal with this excessive vendor payables? We need to match it against the employee expense reimbursement. The company needs to post the Advance Statement document, but the process of filling in the document is a little bit different for the lines part. In the Type field of the line, a special type needs to be selected: Empl. Purchase. Than there would be no need to fill the No. field anymore, as we already bought and booked the expense (G/L account) or Item. We leave it empty, but we fill in the specially introduced fields Emp. Purchase Vendor No. which becomes active (here we select the Vendor the employee made a purchase from), and also Empl. Purchase Entry No. field – here we select the entry that represents the posted purchase invoice of this Vendor we did at the previous step:

Then all the other fields are filled in a normal fashion as they are filled for the Purchase Order. When posting such Advance Statement, the following transactions are generated:

Dt (Vendor Payable Account) for 118 Euro

Cr (Employee Payable Account) for 118 Euro

As a result, Vendor posted transactions are automatically applied, and the Vendor balance is zeroed; VAT is booked in a correct account and is ready to be reimbursed with correct details; and the company has a payable debt against the employee.

The same compensation transactions will be made by the company when he will form the Expense Reimbursement Report and return the receipt to the company:

Dt (Employee Payable Account) for 118 Euro

Cr (Bank Account) For 118 Euro

So the employee balance will also be zeroed.

This is how the standard Dynamics NAV 2017 prints out the report (accounting printform), that needs to be signed by employee, looks like:

In Awara IT Solutions we have a practice to make a sort of "face lifting" to the presented form to make it better.