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Under VAT calculation,there having two kinds of VAT ..that is input VAT and Output VAT
Purchases 10000 Dr
Input Vat 500 Dr
Cash/Bank 10500 Cr
Purchases @ 5% a/c Dr. 10000
Input VAT @5% a/c Dr. 500
Bank / Cash/ S.Creditors Cr 10500
(Vat Amount Calculated assuming the purchase amount is exluded VAT)
PURCHASED A/C DEBIT 9500
INPUT VAT DEBIT 500
CASH/ BANK / VENDOR CREDIT 10000
OR
PURCHASED A/C DEBIT 9500
OUTPUT VAT DEBIT 500
CASH/ BANK / VENDOR CREDIT 10000
BECAUSE WE CAN PROVIDE ONLY ONE SIDE VAT . NOT DOUBLED.
PURCHASES (DR) 10,000
VAT @ 5% (DR) 500
PAYBLE (CR) 10,500
IT IS ASSUMED THAT THE PURACHED PRICE IS VAT EXCLUSIVE. AND VAT ON PURCHASE OF GOOD AND SERVICES IS INPUT TAX
Purchase Accounts Dr Rs. 10000
Cr Cash A/c Rs. 9500
Cr 5% Vat Tax A/c Rs. 500
Purchase A/C Dr.,
Input VAT Dr.
To Bank/Cash/Vendor Cr.,
Purchase A/C Dr. 10000
Input VAT Dr. 500
To Cash or Bank/Vendor Cr. 10500
PURCHASE A/C - DEBIT - RS. 10000
INPUT VAT A/C - DEBIT - RS. 500
TO SUNDRY CREDITORS/BANK/CASH A/C CREDIT - RS. 10500
ASSUMED THAT PURCHASE MADE FOR DIRECT USE IN BUSINESS.
VAT is equal to 500 SAR.
The journal entry is as follows:
Purchases / Inventory (Dr) 10,000
VAT Recoverable amount (Dr) 500
Supplier / Cash / Bank (Cr) 10,500
To calculate VAT on Purchases the following formula is used
VAT Inclusive price x 5/105
so 10000 x 5/105= 476
the Entry will be DR Inventory 9524
CR Cash 9524
for VAT Dr VAT Expense 476
Cr Cash 476
Dr. Purchase 1000
Dr. VAT Input 50
Cr. Supplier 1050
