how do you account for VAT on non-current assets for cost, depreciation and disposal?
I'm particularly confused when a question gives the original cost of the asset 'excluding vat' then the disposal proceeds 'including vat' , what does that mean for vat on cost and depreciation?
Also what about vehicles, what do we do with vat for depreciation and disposal of vehicles and does it apply to all types of vehicles? (cars, delivery vans, trucks etc?)
Comments
-
T accounts will help you break this down.
Have your assets, depreciation, disposal, vat and bank accounts setup. I would suggest in excel so you can follow it though on the screen and also do your calculations.
Usually there is only vat on machinery and things like delivery vehicles, cars usually would be gross not net.
Disposal of an asset would debit the bank T account in full and then net credit to the disposal account and net vat credit to the vat account (if vat is involved)0 -
Thank you, that makes sense to me now. I am getting confused by some of the practice questions I think, such as:Krisso said:T accounts will help you break this down.
Have your assets, depreciation, disposal, vat and bank accounts setup. I would suggest in excel so you can follow it though on the screen and also do your calculations.
Usually there is only vat on machinery and things like delivery vehicles, cars usually would be gross not net.
Disposal of an asset would debit the bank T account in full and then net credit to the disposal account and net vat credit to the vat account (if vat is involved)
A vehicle which cost £17,000 (net of VAT) is being depreciated at 20 per cent per year using the diminishing (reducing) balance method.
What will be the amount of the depreciation charge in the third year?
The answer was £2176 which is calculated leaving the vat off, but we are told vehicles are an exception to the rule and should be entered as cost including vat as it cant be reclaimed.
Seems it depends how they ask the question if we should leave it off or not.
0 -
‘Who’ says vehicles are an exception?
Vehicles are not only cars they can be commercial vehicles where VAT can be claimed back!0 -
Is that where I'm getting confused then? Are cars an exception but commercial vehicles are not?douglasstroud said:‘Who’ says vehicles are an exception?
Vehicles are not only cars they can be commercial vehicles where VAT can be claimed back!
So cars cant have vat reclaimed, but commercial vehicles can?
It was in my tutorial that there was some sort of exception with cars/vehicles but I obviously missed what it was0 -
Cars are generally not claimable or chargable for VAT purposes (there are some exceptions to this), vans, lorries are claimable.
This means when doing the purchase cost for FA a car will be full price including VAT but vans and lorries will be net of VAT.AAT Level 4, MAAT
ACCA in progress
F4- Passed Aug 2020
F5- Passed Dec 2020
F6- Passed Sep 2020
F7- Passed June 2021
F8 - Passed Sep 2021
F9 - Passed June 2021
SBL -
SBR - Passed Mar 22
ATX - Passed Dec 21
APM - Passed June 220 -
Thank you for the info, that helps a lotPian32 said:Cars are generally not claimable or chargable for VAT purposes (there are some exceptions to this), vans, lorries are claimable.
This means when doing the purchase cost for FA a car will be full price including VAT but vans and lorries will be net of VAT.0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 18.9K For AAT students
- 259 NEW! Qualifications 2022
- 146 General Qualifications 2022 discussion
- 9 AAT Level 2 Certificate in Accounting
- 37 AAT Level 3 Diploma in Accounting
- 64 AAT Level 4 Diploma in Professional Accounting
- 8.9K For accounting professionals
- 23 coronavirus (Covid-19)
- 274 VAT
- 92 Software
- 274 Tax
- 137 Bookkeeping
- 7.3K General accounting discussion
- 193 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 352 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 590 Job postings
- 17 Who can benefit from AAT?
- 36 Where can AAT take me?
- 44 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 65 AAT membership