VAT Help again!!

Brian D

Hello,

I need help on VAT entries. Please ignore all other postings that I done.

I work for a charity and we operate a partial exemption scheme ie we can only claim a proportion of our INPUT VAT.

Im trying to prepare a VAT journal for quarter one.

At the end of quarter one the INPUT VAT = 10,323
OUTPUT VAT = 19,872

We calulated that we can only claim £7,555 of our INPUT VAT. Therefore, we made a payment of £12,317.

My journal would be:

Cr Bank 12,317
Dr VAT Repayment 12,317 (VAT Control a/c)
Cr Irrcoverable VAT (VAT Control A/c) £2,768
Dr Irrcoverable VAT (Profit & Loss a/c) £2,768

The INPUT VAT that we could claim ie £7,555 I propose to CREDIT as INCOME in the P&L but what do I DEBIT!!???

Please can you help me? I use Exchequer Accounting Software.

Thank you,
Brian D

Monsoon

Surely the Input VAT is already in the control accout? I'm not familiar with your software, however I would guess that in the quarter:

DR VAT CONTROL (Input VAT) £10323
CR VAT CONTROL (Output VAT) £19872
Balance on VAT CONTROL £9550

However, you can't pay that, as you can't reclaim all your Input VAT.

The difference between 10323 and 7555 is £2768, therefore you would

CR VAT CONTROL £2768
DR P&L - Ireecoverable Input VAT £2768

This will make the balance on the VAT control account correct to your liability, which will be £12318

You then pay this as normal, CR bank, DR VAT Control.
Balance on VAT control is now Nil.

That should be it.

I think you're getting confused with this bit:

The INPUT VAT that we could claim ie £7,555 I propose to CREDIT as INCOME in the P&L but what do I DEBIT!!???

You don't need to do this, VAT doesn't hit the P&L. All the above journals should work, assuming Exchequer puts the Input and Output VAt in the control account as it goes along.

Brian D

Thank you for your help. This is was I thought as well and I wanted to double check!

Brian

Monsoon

Jolly good, glad it made sense