accruals and vat

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CHUNKYMONKEY
CHUNKYMONKEY Registered Posts: 29 Regular contributor ⭐
i have end of year accruals which would be dr expense, cr accruals usually but this has vat in. should the amount in the accruals account include or exclude the vat? i'm using a simple excel spreadsheet so just need the journal entry and how to reverse it next year lol. i've just gone blank and the aat books mainly just have examples without vat. i remember on degree course a tutor said vat is just vat so is neither acrrued or prepaid.

so, if anyone could give me a quick example of what the debit and credit would be for say eg. accrued expense/gas bill where gross was £47. I would be really greatful thanks

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  • Nilesh Mandvia
    Nilesh Mandvia Registered Posts: 91 Regular contributor ⭐
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    When you calculate accrual or prepayment, you just take the net figure i.e. excluding VAT. You have to account for VAT on tax point. A tax point is when something happens i.e. supply of services or goods, payment made or received, invoice raised etc.

    As you are dealing with accrual there is no tax point, hence you do not include VAT. You always use net amount.

    Accrual at year end for example 30/06/08

    Debit : PL Expense account i.e. gas/electricity Gas Accrued at 30/06/08 £40.00

    Credit: BS Accrual Account Gas Accrued at 30/6/08 £40.00


    At beginning of next year 01/0708

    Debit : BS Accrual Account Gas Accrued at 30/6/08 £40.00

    Credit: BS Expense account i.e. gas/electricity Gas Accrued at 30/06/08 £40.00


    I presumed the supply of Gas/Electricity at Standard Rate of 17.5%. You check whether it is 5% or 17.5%.

    Nilesh
  • CHUNKYMONKEY
    CHUNKYMONKEY Registered Posts: 29 Regular contributor ⭐
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    thanks for reply, exactly as i thought but its always best to double check.

    cheers!
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