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VAT

  • 13 posts
  • # 72474

Could some please advise if there is a good way of remembering which side the VAT goes - eg - if you sold goods on credit - does the net figure go into sales and vat - and gross to the debtor it or is the VAT on the same side as the debtor and gross goes to sales ?????? - hope this makes sense
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  • 27 posts
  • # 72476

Heidi123 said:

“Could some please advise if there is a good way of remembering which side the VAT goes - eg - if you sold goods on credit - does the net figure go into sales and vat - and gross to the debtor it or is the VAT on the same side as the debtor and gross goes to sales ?????? - hope this makes sense”
Hi
I don't know if this is a fool proof way of remembering but when I was learning bookkeeping (a long time ago) I was taught the following:

Debit in Left (as in side of the journal) Credit Out Right

Expenses and Assets are debits and Sales and Creditors are credits. 

In answer to your query

Credit Sales with the net  and Output tax obviously with the tax and Debit with the gross amount.

Try to think about the transaction that it refers to. If you are making a sale eg £100 + vat  total £120. Your customer has to pay you the total of £120, so it makes sense that the customer is in debt to the business for £120.  A business that is vat registered is an "agent " for HMRC - collecting the VAT, so it needs to be separated from the value of the goods/service sold. It is a liability of the business (the business owes that money to HMRC).

I hope that helps

Regards

Lynne
Hydebendough
  • 12 posts
  • # 72730

Not sure if there is a fool proof way of remembering it really, other then knowing the double entry that is necessary, and which element of the double entry has the vat. Example:

Sales of £100 +vat@20% = £120

so for a cash sale you MUST get £120 therefore £120 MUST go into cash. So if one side (debit in this case) MUST be gross then the other side (credit in this case) will have the net and vat parts, so credit sales £100 and credit VAT £20

 

same goes for sales on credit, your debtor MUST owe the gross amount, therefore the sales (again obviously credit side) has the net and vat.
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