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purchase invoices from vat and non vat suppliers

  • Student
  • 33 posts
  • # 116195

 

 

Hello

I posted this in exam section but thought might get a quick answer here maybe!!

 

Im self studying through kaplan books but cant get my head around the correct way of posting to ledgers?

how 1) non vat business posts receipts or invoices from a  vat supplier and how 2)a vat business posts from a non vat supplier?

 

I understand

1) non vat business posts the gross amount because it does not account for VAT that be either from a non vat or vat supplier?

2) a vat reg business posts the gross amount to creditor or cash and net to purchases and VAT.

 

is this correct?

 

bUT IF YOU RECIEVE a receipt or invoice from non vat supplier to a VAT business then is the amount inclusive of VAT ?

 

Please if anyone can clarify, Im stuck on how to post these to the ledgers? 

 

regards

 

Ezam

 

  • Fellow PM.Dip
  • Practice Licence
  • 39 posts
  • # 116196

Ezam said:

   

bUT IF YOU RECIEVE a receipt or invoice from non vat supplier to a VAT business then is the amount inclusive of VAT ?

  


 A non-VAT business supplier's invoice will not include any VAT. They are not registered for VAT so they cannot claim it back and cannot charge it.

The total amount they charge is the cost that gets posted to the VATABLE business's ledger

does that help?

  • Student
  • 33 posts
  • # 116206

Hi thanks for replyng but what i still dont get is for example

say the non vat supplier sends an invoice amount of £100. he doesnt include vat in it as he is not vat registered like u said.

But does the vat registered business who is recieving has to make payment of £100.00 for the invoice. So I understand that he

 

cr creditor £100

dr purchases £83.34

dr vat £16.66

later on when he makes payment

dr creditor £100

cr bank/cash account £100.00

 

what my point is because the business is vat registered if he recieves an invoice from a non vat supplierdoes he have to account for vat from the invoice gross total? like above in my example

  • Student
  • 33 posts
  • # 116207

or would the vat registered businesswhen recieving the invoice

 

cr creditors account with £100

dr purchases with £100?

 

As u can see I need an explanationand am confused??Frown

  • Fellow PM.Dip
  • Practice Licence
  • 39 posts
  • # 116210

Ezam said:

 

what my point is because the business is vat registered if he recieves an invoice from a non vat supplierdoes he have to account for vat from the invoice gross total? like above in my example


 No, he doesn't account for VAT because there isn't any VAT charged.

  • Fellow PM.Dip
  • Practice Licence
  • 39 posts
  • # 116211

Ezam said:

or would the vat registered businesswhen recieving the invoice

 

cr creditors account with £100

dr purchases with £100?

 

As u can see I need an explanationand am confused??Frown


 This is correct, 

  • Student
  • 33 posts
  • # 116215

thanks Carol for clarifying

regards

 

Ezam

  • Student
  • 33 posts
  • # 116229

Hi Carol 

please could you answer anther query for me regarding VAT calculation?

I KNOW net invoice price + vat % = gross price.

Any trade discount offered would b - from net invoice, then VAT calculated on that net inovice price to = gross. But what if the net invoice total includes zero rated items? 

 

e.g ill make my own example:

£ 50.00 adults clothes at 20 %

£50.00 childrens clothes at 0 %

net invoice = £100.00

vat = £10.00

gross= £110.00

now say trade discount is at 10 %

so would from the £100.00 net invoice price - 10 trade discount, which is £10.00 = £90.00 (new net invoice total)

Now what im confused about is a) would I calculate VAT at 20 % from this new total?so VAT would be £18.00? hence gross =£108.00

                                            b) would i calculate VAT from £50.00 adult clothes - £5.00 trade discount = £45 so that is VAT WOULD be £9.00? so gross would be £99.00

Please can you clarify 

kindly

 

Ezam

  • Student
  • 45 posts
  • # 116235

Ezam said:

Hi Carol 

please could you answer anther query for me regarding VAT calculation?

I KNOW net invoice price + vat % = gross price.

Any trade discount offered would b - from net invoice, then VAT calculated on that net inovice price to = gross. But what if the net invoice total includes zero rated items? 

 

e.g ill make my own example:

£ 50.00 adults clothes at 20 %

£50.00 childrens clothes at 0 %

net invoice = £100.00

vat = £10.00

gross= £110.00

now say trade discount is at 10 %

so would from the £100.00 net invoice price - 10 trade discount, which is £10.00 = £90.00 (new net invoice total)

Now what im confused about is a) would I calculate VAT at 20 % from this new total?so VAT would be £18.00? hence gross =£108.00

                                            b) would i calculate VAT from £50.00 adult clothes - £5.00 trade discount = £45 so that is VAT WOULD be £9.00? so gross would be £99.00

Please can you clarify 

kindly

 

Ezam


 Hiya, remember trade discount is taken off before the customer receives the product. Ie on a wholesalers listing a price is £25 and for trade discount is 10% off then the total invoice will be £22.50.

So If in your scenario you have a total of £100 on the invoice take the 10% off then work out the vat on the remaining £50 which is vat chargable so now its £10 Vat so £100-10%=£90 net £100 gross.

 

At least thats how it works out to me.

 

Digit

 

Actually it would probably be better doing this. Take 10% off each individual sale of £50 so £45 mow for adult clothes and £45 for childrens. Then work out vat on £45 adult clothes is £9. So gross would be £99



Edited at 03 Feb 2018 04:41 PM GMT

  • Student
  • 33 posts
  • # 116244

yes thanks for that, this seems to maske sense

 

regards

 

Ezam

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