vat

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
hi everyone,,,,<BR><BR>im stuck with the vat side of things when it comes to posting entries from the payments side of the cash book..<BR>if for example i had an entry in the cash book for payment through the bank for office equipment of £470inc vat, it appears that i have to seperate the vat and net amount and post the net amount into the office equipment account...is this because the cash book is part of double entry??<BR>im a bit confused as to why i dont post the whole ammount of £470 into the office equipment account...<BR><BR>as you can see im a bit confused!!!<BR><BR>cheers<BR><BR>rob

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    vat

    Hi Rob<BR><BR>Your cash book can be part of the double entry system depending upon how your company is set up, however you need to have opposite debit and credit entries that equal the same amounts to balance your accounts, as you know. <BR><BR>The balance from the cash book is used in the trial balance under bank or cash in your case the £470 has been credited out of the bank and included in the amount of money remaining in the bank account (although the bank account usually shows as a debit in the TB your £470 has been credited out of the bank and only the balance of the bank account makes it to the TB), the opposite debit entries are £400 to office equipment, and £70 to vat.<BR><BR>It's important to post items correctly so that when you transfer figures from you trial balance to the balance sheets and P&L reports you are portraying an accurate state of the companies financial position.<BR><BR>Hope this makes sense!<BR><BR>Tracy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    vat

    thats great cheers.....back to the study then!!<BR><BR>bye for now
  • System
    System Posts: 100,534 🤖 Admin 🤖
    vat

    <BR>Just to add to this -<BR><BR>If you are VAT registered, then you will be claiming VAT on your purchases. <BR>So if you claim your £70 back from HMCE, then your office equipment hasn't cost you £470, it's only cost £400.<BR><BR>So, you have to credit the bank with the whole amount, because that's what you paid, but the £70 goes to VAT control, representing a debtor. HMCE owe you that £70 until you do your next VAT return.<BR><BR>Hope that helps!

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