Help with green light question

DannyMMA

Hi can anyone help me with the following question from final accounts preparation green light?

The closing balance on a sole trader’s VAT control account shows VAT reclaimable from HMRC of £470. During the month, the VAT columns of the purchases and sales day books totalled £7,300 and £9,900 respectively.
If the cash paid to HMRC during the period totalled £4,800, the opening balance of...(£2670) or (£1730)... represented VAT outstanding at the start of the period which was... (reclaimable) or .. (owed)... by the trader.


I have seen the answer but cant make sense of why it is. I am wondering if AAT has it wrong lol

N4T

DR___________________________________CR
......................................................... Op bal 1730
Purchases 7300..................................Sales 9900
Paid to HMRC 4800
............................................................Cl bal 470

DR reduces liability to HMRC and CR increases liability
The tricky part is probably knowing which side to place the closing balance of £470? This is a balancing figure and when b/f into the next period it then moves onto the DR side. Reclaimable therefore reduces the liability i.e DR.

The other three Sales, purchases and paid out to HMRC in the period should be straightforward...let me know if not.

Once the figures are in place we can work out that the opening balance s £1730 and as its on the CR side it mean it is owed by trader to HMRC.

I hope this helps.

DannyMMA

Yes, I get it now thank you!!