Statement of Cash Flow Direct Method

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moozy7
moozy7 Registered Posts: 33 Regular contributor ⭐
in Management Accounting: Budgeting
To adjust for example Sales for cash flow purposes, we look at the sales control account.

My problem is that Sales are ex VAT and Sales Control Account is including VAT.

How does that work please?

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  • davealucas
    davealucas Registered Posts: 140 Dedicated contributor 🦉
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    The VAT element goes to the VAT Control Account.

    For example, if you sell an item for £100 plus VAT, the transaction will be:

    Dr Sales £100
    Dr VAT Control Account £20
    Cr Sales Control Account £120

    The Sales Control Account is a combined debtor account almost like a cash transaction.
  • Cheesypeesy
    Cheesypeesy Registered Posts: 101
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    Just a slight nitpick Dave, I think you've got your debits and credits the wrong way round!
    Matthew Dearlove MAAT
    Currently on CIMA Management Level. Passed P2, F2 and E2. Preparing for November 19 MCS.
  • davealucas
    davealucas Registered Posts: 140 Dedicated contributor 🦉
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    @Cheesypeesy How right you are. Mental note to self, don't give advise when tired.

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