0
The VAT can affect the accounting equation in two different ways.
The accounting equation is
ASSET=CAPITAL+LIABILITIES
So, if VAT is OWED from HMRC (receivable) it will be an asset, so the asset will increase and the Capital will increase as well.
ASSET+X=CAPITAL+X+LIABILITIES, where X is the amount of VAT received.
If VAT is owed TO HMRC (payable), then the liabilities will increase, which means that the capital will decrease with the same amount.
ASSET=(CAPITAL-Y)+(LIABILITIES+Y) where Y is the amount of VAT to be paid.
Wiki User
∙ 10y ago
Add your answer:
Earn +20 pts
How do debits and credits affect the accounting equation?
The debits in the accounting equation increase the amount that appears on the left side. The credits in the accounting equation do the opposite and increase any amount that appears on the right side.
How does sales affect the accounting equation?
acoounts receivable and capital
How do withdrawals affect the accounting equation?
Debit Withdraw account and Credit Cash
How does paying a liability with cash affect the accounting equation?
assets decrease; liabilities decrease
What is accounting treatment for 'vat' in the books of accounts?
for VAT on sales:Debit ReceivablesCredit VATCredit Salesfor VAT on purchases:Debit VATDebit PurchasesCredit Payables
How do debits and credits affect the accounting equation?
The debits in the accounting equation increase the amount that appears on the left side. The credits in the accounting equation do the opposite and increase any amount that appears on the right side.
How does sales affect the accounting equation?
acoounts receivable and capital
How do withdrawals affect the accounting equation?
Debit Withdraw account and Credit Cash
How does paying a liability with cash affect the accounting equation?
assets decrease; liabilities decrease
What is accounting treatment for 'vat' in the books of accounts?
for VAT on sales:Debit ReceivablesCredit VATCredit Salesfor VAT on purchases:Debit VATDebit PurchasesCredit Payables
What does the Accounting Equation in accounting?
The Accounting Equation is Assets=Liabilities + Owner's Equity?
How does the purchase of equipment by signing a note affect the accounting equation?
asset increased, liability increased
What is the role of accounting equation in the study of accounting equation?
you did the mathh wrong and must re-do it
Example of accounting equation?
The accounting equation is as follows: Assets = Liabilities + Stockholder's Equity
What is the fandamental accounting equation?
The fundamental accounting equation: Assets = Liabilities + Equity, is the basis for all financial accounting measurements.
What is the accounting equation and how does it work?
The accounting equation displays the relationship between capital, liabilities and the assets. The accounting equation shows that the assets are a sum of the liabilities and the invested capital.
What is equality of the accounting equation?
Equality on the accounting equation is that Assets equal liabilities + owner's equity
