Value Added Tax Bookkeeping Question

Value Added Tax

Value Added Tax

In the double entry if you pay by check and you have vat added where do you put the debit and credit with the vat? Thanks

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Aug 24, 2023
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starstarstarstarstar 		Double Entry VAT
by: BB

In a double-entry accounting system, when you pay for something by check and VAT is included in the amount, you'll have multiple accounts affected in the entry. Here's how you can generally categorize the debit and credit with VAT:

Debit (Expense):
Debit the expense account for the net amount (excluding VAT).
Debit the VAT Input (or VAT Recoverable) account for the VAT amount.

Credit (Liability):
Credit the bank account from which the check is drawn for the total amount (including VAT).

Example Journal Entry:
Debit: Expense Account (e.g., Purchases) $X (net amount)
Debit: VAT Input $Y (VAT amount)
Credit: Bank Account $Z (total amount, $X + $Y)

Note that the VAT treatment can vary depending on your location, the nature of the transaction, and other factors.

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VAT

by Sharon
(UK)

If a customer has rec'd cash of say £500 (cash sales) do you deduct the VAT amount from this or add it on, also do you only quote the net amount into the relevant ledger or the gross? Thanks

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Aug 24, 2023
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starstarstarstarstar 		VAT Payable
by: BB

When recording a cash sale, the total amount received (£500 in this example) would typically include the VAT, assuming that the sale is subject to VAT. Therefore, you would need to break down the total amount into the net amount (the price excluding VAT) and the VAT amount itself.

Here's how you can handle it:

Calculate the Net Amount: You can calculate the net amount by dividing the total amount by (1 + VAT rate). So, if the VAT rate is 20%, you would calculate £500 / 1.20 to get the net amount of £416.67.

Calculate the VAT Amount: The VAT amount would be the difference between the total amount and the net amount, which would be £500 - £416.67 = £83.33 in this case.

Record in the Ledger: Depending on your accounting system and local regulations, you may need to record both the net and gross amounts in the relevant ledger. The net amount would be recorded as sales, and the VAT amount would be recorded in a VAT liability account.

Example Journal Entry:
Debit: Cash/Bank £500 (gross amount)
Credit: Sales £416.67 (net amount)
Credit: VAT Payable £83.33 (VAT amount)

Always consult with a local tax professional or accountant to ensure that you are complying with the specific VAT regulations in your jurisdiction.

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Vat Accounting Entry

by Satish
(Nagpur)

I want to know how to make Accounting entry of Vat of Subcontractor work done bill in construction company in India

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Aug 24, 2023
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starstarstarstarstar 		GST Goods And Services Tax
by: BB

In India, VAT has been largely replaced by the Goods and Services Tax (GST), so the accounting entry for a subcontractor's work done bill in a construction company would typically involve GST rather than VAT. Here's how you might record the transaction considering GST:

Assuming you have received an invoice from the subcontractor, which includes both the value of the work done and the GST on that work, you can record it as follows:

Example Journal Entry:
Debit: Construction Expense (Value of Work Done)
Debit: Input GST (GST on Subcontractor's Bill)
Credit: Accounts Payable (Total Invoice Amount including GST)
If you are paying the invoice:

Debit: Accounts Payable (Total Invoice Amount including GST)
Credit: Bank or Cash (Total Invoice Amount including GST)

Please note that the above entries are general in nature and might vary based on the specific circumstances of the transaction, including the type of work done, GST rates, etc. Consulting with a qualified accountant who is familiar with Indian GST law would be the best approach to ensure that the entries are recorded correctly.

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Vat Clearing

How can I accurately record VAT clearing and business levy in the financial statements while working on a spreadsheet?

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Aug 24, 2023
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starstarstarstarstar 		VAT Clearing
by: BB

Recording VAT clearing and business levy in the financial statements can be done as follows:

VAT Clearing:

Debit (Asset): Input VAT (VAT paid on purchases)
Credit (Liability): Output VAT (VAT collected on sales)

VAT Clearing Entry: When you pay or claim the VAT, you'd debit Output VAT and credit Input VAT by the net amount payable or receivable, and the balancing figure would go to your bank or cash account.

Business Levy:

Debit (Expense): Business Levy Expense (amount of the levy)

Credit (Liability): Business Levy Payable (liability account where you record the levy until it is paid)

When you pay the levy, you'd debit the Business Levy Payable account and credit the bank or cash account.

These entries would be reflected in your income statement (for the VAT and levy expenses) and balance sheet (for the VAT and levy liabilities or assets).

Please consult with a financial professional, as the exact accounting might vary depending on jurisdiction, specific rules, and the nature of your business.
Aug 24, 2023
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starstarstarstarstar 		VAT Clearing
by: BB

How can I accurately record VAT clearing and business levy in the financial statements while working on a spreadsheet?

Answer:
Recording VAT clearing and business levy in the financial statements can be done as follows:

VAT Clearing:

Debit (Asset): Input VAT (VAT paid on purchases)
Credit (Liability): Output VAT (VAT collected on sales)

VAT Clearing Entry: When you pay or claim the VAT, you'd debit Output VAT and credit Input VAT by the net amount payable or receivable, and the balancing figure would go to your bank or cash account.

Business Levy:

Debit (Expense): Business Levy Expense (amount of the levy)

Credit (Liability): Business Levy Payable (liability account where you record the levy until it is paid)

When you pay the levy, you'd debit the Business Levy Payable account and credit the bank or cash account.

These entries would be reflected in your income statement (for the VAT and levy expenses) and balance sheet (for the VAT and levy liabilities or assets).

Please consult with a financial professional, as the exact accounting might vary depending on jurisdiction, specific rules, and the nature of your business.

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Vat on Directors Loan Account Purchases

Please help, my director books his personal air tickets via the company accounts, can I claim the vat on these invoices, or should the entire invoice amount be for the loan account?

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Aug 24, 2023
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starstarstarstarstar 		Personal Air Tickets Bookkeeping
by: BB

Sure, let's look at the scenario where a director books personal air tickets via the company accounts:

Personal Air Tickets: If the air tickets are strictly for personal use and not related to business activities, you should not claim the VAT on these invoices as a business input tax credit. Tax authorities usually require that VAT claims be related to business activities.

Recording the Transaction: The entire invoice amount should be allocated to the director's loan account or a similar account that tracks amounts the director owes to the company. This keeps the personal transaction separate from the business's financial records.

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VAT On Sales Refund

by Margaret
(Limerick)

Hello.

I am writing a cheque as a refund to a customer. Can I claim vat back on this cheque payment as I would have paid the full vat on origional sales invoice?

Thank you.

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Jun 07, 2010
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starstarstarstarstar 		VAT
by: Bookkeeping Essentials, Canada

If your VAT works that same as Canada, you include VAT when you prepare your refund cheque to the customer.

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Vat Setoff

by ashu_d21@rediff.com
(pune Maharashtra India )

Can we take vat set off on purchase of 1st quarter in 2nd quarter?

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Aug 24, 2023
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starstarstarstarstar 		VAT Set Off
by: Stephanie

The ability to take a VAT set off for purchases made in one quarter during a subsequent quarter can depend on the local tax laws and regulations. Here's a general response:

In many jurisdictions, businesses are allowed to carry forward the input VAT from purchases made in one quarter to subsequent quarters if they were unable to set it off against their output VAT in the same period. This carry-forward can be utilized in the next quarter's VAT return, subject to specific rules and conditions.

However, the exact timing and requirements for claiming a VAT set-off may vary by jurisdiction, and there might be deadlines or specific documentation requirements that must be met. It would be wise to consult with a local tax professional or refer to the local tax authority's guidelines to understand the specific rules applicable to your location.

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