Help with Mock Test

dumutroba

Hi can anyone help with question 1.2
I think the initial entry is Dr Entertaining Dr Vat Cr Bank
But I need help reversing this
I know the answer, but the logic escapes me

davealucas

You don't need to make any adjustments to the bank account as the money has (in theory) already been paid. What is needed is an adjustment removing any recoverable VAT and converting it to an expense. You cannot recover VAT incurred for entertaining your clients (except overseas clients).

The journal will need to debit the entertaining account and credit the VAT Control Account for the VAT element which would appear to be £210.

dumutroba

Thank you for your answer, much appreciated

dumutroba

Thank you for your answer
Much appreciated