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VAT stands for value added tax. it is simply a form of compensation tax.
Let suppose a firm paid $ 30,000.00 to the government under the head of value added tax on 30th June 2010. The journal entry will be as follow:
DR: Value Added Tax (VAT) Account $ 30,000.00
CR: Cash / Bank Account* $ 30,000.00
* If payment is made by cash, then Cash Account will be written on the credit side. And if bank draft or cheque is paid, then Bank Account will be written on the credit side.
What else can I help you with?
Who introduced VAT?
The government, it is a tax
What is ä Common day Item taxed by the French government (answer is in 4 words)?
Value Added Tax (VAT).
How did the government overcome the Kiel Mutiny?
They paid their debt.
Why is VAT so complicated system?
There are many people, especially business owners, who would like to know why! It's complicated by being a paid in a sort of chain, passed from supplier to customer, on both goods and services. There are also many exemptions on a complex list of goods and services, or "zero-rate" VAT rates - the difference seeming absurd until you realise that the latter implies it would be relatively easy to change the rate - upwards. For example, if I were to buy fish-&-chips to eat at home I would not be charged VAT on them, but I would if I ate them as a meal in the cafe section of the same chip-shop. There are situations in which companies can claim refunds on VAT, or pass it on, paid on certain goods such as road fuel used in the course of the business. Then the VAT rate and exemptions differ markedly from country to country within the European Union - only an organisation like the EU could invent a tax system so wilfully and bewilderingly complicated!
What is the journal entry for salary payable and what when salary is paid to him?
Salary payable A/c Dr 5000 To Cash Cr 5000
How can I reclaim VAT?
To reclaim VAT, you need to be a registered business that has paid VAT on goods or services. You can reclaim the VAT by submitting a VAT return to the tax authorities, detailing the VAT you have paid and the VAT you have charged. This process allows you to receive a refund for the VAT you have paid.
Why is vat collected?
Value Added Tax (VAT) is government applied tax on taxable supplies at different rates most of which is 15% in UK, while lower rate 5% and zero-rate are used as well. Let's say there is a company A,which manufactures cars and sells it to the distributors.Now the company A will charge VAT to distributor and include on the invoice. Now A has simply collected the VAT on behalf of government and has the liability to pay the VAT collected back to government. While the distributor can claim that paid VAT back from the government if the distributor is VAT registered.so by this point, government has actually received nothing,as it returned to the distributor whatever it received from the company A. Now, when the distributor sells the car to end-user, distributor charges VAT to that end-user and collects the VAT again on behalf of government, and pays the VAT collected to the government.As the end-user cannot be VAT registered, so he cannot claim the VAT paid from the government, so the government has now actually received the VAT inflow.
What is VAT output and VAT input?
VAT that is charged by a business and paid by its customers is known as "output VAT" (that is, VAT on its output supplies). VAT that is paid by a business to other businesses on the supplies that it receives is known as "input VAT
Does a person who is not a vat vendor have to pay vat for services from a vat vendor?
Yes, a person who is not a VAT vendor is generally required to pay VAT on services received from a VAT vendor. The VAT is typically included in the price of the services, and the VAT vendor is responsible for collecting and remitting that tax to the government. However, if the recipient of the services is a consumer or business that is not registered for VAT, they cannot claim back the VAT paid.
What is the Journal entry of Vat payable to bank?
debit bank accountcredit VAT payable
Is VAT account put in the profit and loss account?
Value Added Tax (VAT) is not recorded in the profit and loss account because it is a tax collected on behalf of the government, not an expense or revenue of the business. Instead, VAT collected from customers is recorded as a liability until it is paid to the tax authorities, while VAT paid on purchases is recorded as an asset or expense. Only the net impact of VAT, if any, after offsets is reflected in the financial statements.
What is the Journal entry for sale on credit with VAT?
debit Accounts receivablecredit sales revenueCredit VAT payable
How is vat charged?
Value Added Tax (VAT) is charged at each stage of the production and distribution process on the value added to goods and services. Businesses collect VAT from their customers at the point of sale, adding it to the selling price. They then remit the collected VAT to the government, minus any VAT they have paid on their own purchases (input VAT). This system ensures that the tax is ultimately borne by the final consumer.
Journal entry of credit sale with vat?
simpleParty A/c Dr. (inclusive of vat)sale A/c Cr. (exclusive of vat)Vat output Cr.
What is the contra account for vat on import?
The contra account for VAT on import is typically the "VAT Input Tax" account. When a business imports goods, it pays VAT on those imports, which can be reclaimed as input tax on its VAT return. This means the VAT paid is recorded as an asset (input tax) in the accounting records, offsetting the VAT liability when sales are made. The contra nature highlights the relationship between the VAT paid on imports and the VAT that is recoverable.
What are the sources of vat?
Value Added Tax (VAT) sources primarily include the sale of goods and services to consumers. Businesses collect VAT on their sales and remit it to the government, while also being able to reclaim VAT paid on their purchases. Other sources may include imports, where VAT is charged on goods entering a country. Additionally, some jurisdictions may apply VAT on specific sectors, such as utilities or luxury items.
What does letters VAT stand for?
VAT stands for Value Added Tax. It is a consumption tax levied on the value added to goods and services at each stage of production or distribution. Businesses collect VAT on behalf of the government and pass it on to the consumer, which ultimately impacts the final price paid for products and services.
