December 16, 2019, 03:10:01 pm

VAT accounting treatment

Started by TechShristi, December 24, 2013, 08:39:30 am

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TechShristi

December 24, 2013, 08:39:30 am Last Edit: December 24, 2013, 09:03:56 am by TechShristi
After Accounting treatment of Excise duty, let have a look over the accounting treatment of VAT.

Find the Excise duty treatment over here:
http://forum.techshristi.com/accounting-27/excise-duty-accounting-treatement/

VAT ACCOUNTING TREATMENT:

1) Purchase of Goods:

Quote
1.35% VAT Goods Purchased Goods a/c   Dr
2% VAT Goods Purchased Goods a/c  Dr
1.21% VAT Goods Purchased Goods a/c  Dr
VAT Credit Receivable a/c                              Dr
To          Supplier/Creditors a/c             Cr


Logic:

       
  • Different account will be opened for different rate.

  •    
  • There fore, different account is debited with different rate

  •    
  • Same as Excise duty, VAT credit is available so the VAT amount would be transfer to the VAT Receivable account

  •    
  • Purchase account will be recorded at a Net amount excluding vat payable.

  •    
  • Total amount including VAT will be credited to the Creditor account.

2)  Sale of Goods:

QuoteBank/Customers/Debtors a/c   Dr
To 1.35% VAT Goods Purchased Goods a/c
To 2% VAT Goods Purchased Goods a/c
To .21% VAT Goods Purchased Goods a/c
Logic:

       
  • Being a entry for the sale of various goods and VAT collection thereon

  •    
  • Same as VAT purchase, different account for different rate

  •    
  • Credit the VAT payable on the sales of goods

3) VAT Paid:

Quote
Vat Payable a/c     Dr
To VAT Credit Receivable a/c


Logic:

       
  • Entry for the payment of the VAT payable during the year

  •    
  • Same as Excise, VAT payable will be set off from credit receivable.


4) Remaining VAT paid:


QuoteVAT payable a/c  Dr
To Bank a/c



IN CASE OF CAPITAL GOODS:


1) Purchase of Capital Goods:

QuoteMachinery a/c    Dr
VAT Credit Deferred a/c  Dr
To bank/Asset Vendor


Logic:

       
  • machinery account would be debited with the net amount

  •    
  • VAT paid will be debited to a separate account as 'VAT Credit Deferred' Account, since it will be credited back to us

2) VAT Credit Received on Capital Goods:

Quote
VAT Credit Receivable a/c   Dr
To VAT Credit Deferred a/c


Logic:

       
  • Remember the VAT Credit on the Capital Goods Purchased will be available in 36 Months.

  •    
  • So, credit the amount relevant to the period.

  •    
  • For example: if the capital goods is purchased in the month of 1st July and total amount of VAT credit available is 360000 then VAT credit would be 360000*9/36 = 90000

3)  VAT Paid or Set off against Credit Receivable account:

QuoteVAT payable a/c
To VAT Credit Receivable a/c

TechShristi

December 24, 2013, 08:39:30 am Last Edit: December 24, 2013, 09:03:56 am by TechShristi

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