Vat payable is the amount of vat collected on behalf of the tax authority and payable to them. In other words vat payable is an output vat levied on organisation's customers through the organisation's sales invoices for onward remittance to the tax authority subsequently.
debit bank accountcredit VAT payable
VAT payable is liability for business and shown in liability side of balance sheet of business.
VAT Control accounts are a nominal account used to track amounts of VAT payable and reclaimable by a business during its normal activities. For each purchase and sale an amount equal to the VAT due or receivable in respect of the transaction will be applied to the account. Reviewing the account balance will show the current total liability to HMRC, although that balance may be more than is actually payable if there is a VAT return due.
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.
Input Tax paid on purchases (i.e. output tax collected in the purchase bills) is called Input Tax Credit. Input Tax Credit available on all purchase bills should be arrived (including the Input Tax Credit to be adjusted if any during the previous month). Input Tax Credit is eligible only on the taxable purchases made (from the registered dealers with TIN in force) within the State and VAT shown separately. VAT payable on the taxable sales or deemed taxable sales is called Output Tax payable. The input tax paid on the taxable purchases as above should be deducted from the output tax payable and if the output tax payable is greater than input tax credit, the balance amount to be paid to Government is called Output Tax due/payable. If the Output tax payable is lesser than the Input Tax Credit, the excess amount is called Input Tax Credit available and the same will be carried forward to the next month. The Input Tax Credit carried forward to the next months will be adjusted in the ensuing months. Thus the VAT liability will be calculated only after applying the above procedure at the end of the calendar month and VAT liability arises on the first day of the ensuing month in case of running concern. Reply From: ABHIVIRTHI Tax and Industrial Consultancy R.R.JAGADEESAN VAT PRACTITIONER AND INDUSTRIAL CONSULTANT H-63, Palaami Enclave, New Natham Road Madurai-625014. Cell: 9994990599
debit bank accountcredit VAT payable
No, only the disounted amount is Vatable, the cash discount is not a vatable supply, therefore no VAT is payable on it.
VAT payable is liability for business and shown in liability side of balance sheet of business.
debit Accounts receivablecredit sales revenueCredit VAT payable
VAT Control accounts are a nominal account used to track amounts of VAT payable and reclaimable by a business during its normal activities. For each purchase and sale an amount equal to the VAT due or receivable in respect of the transaction will be applied to the account. Reviewing the account balance will show the current total liability to HMRC, although that balance may be more than is actually payable if there is a VAT return due.
Zero rated items usually relate to goods that are normally subject to Value Added Tax (VAT), but which no VAT is currently payable. For instance, the British Chancellor of the Exchequer may decide not to levy a VAT tax on children's clothes, so children's clothes are rated as zero-rated for VAT.
This is the value added tax on outputs. Any service or sale that the entity provides is considered an output. This is contrasted with Input Vat which is the tax on any inputs the entity acquires. Inputs being Inventory or Services recieved.For ExampleSales 100Cost of Sales 75VAT: 10%Output Vat100 x 10%= 10 PayableInput Vat75 x 10%= 7.5 ClaimableNet VAT Payable= 2.5 Payable
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.
Merits:1. No Tax Evasion2. Ensured Neutrality3. Transaction based System(i.e., it is applicable to all Sales.. that is the simple equation is follows Net VAT payable = Vat on Sales - Vat on Purchases)4. Transparency5. Multi-point Taxation6. Eliminates Cascading Effect7. Self policing System.-----------------------------------------------------------------------------------------------------Demerits:1. Varying VAT Rates2. No Credit against other Taxes3. Increase in tax administration cost4. No Discrimination between Rich and Poor.
VAT Control accounts are a nominal account used to track amounts of VAT payable and reclaimable by a business during its normal activities. For each purchase and sale an amount equal to the VAT due or receivable in respect of the transaction will be applied to the account. Reviewing the account balance will show the current total liability to HMRC, although that balance may be more than is actually payable if there is a VAT return due.
Input Tax paid on purchases (i.e. output tax collected in the purchase bills) is called Input Tax Credit. Input Tax Credit available on all purchase bills should be arrived (including the Input Tax Credit to be adjusted if any during the previous month). Input Tax Credit is eligible only on the taxable purchases made (from the registered dealers with TIN in force) within the State and VAT shown separately. VAT payable on the taxable sales or deemed taxable sales is called Output Tax payable. The input tax paid on the taxable purchases as above should be deducted from the output tax payable and if the output tax payable is greater than input tax credit, the balance amount to be paid to Government is called Output Tax due/payable. If the Output tax payable is lesser than the Input Tax Credit, the excess amount is called Input Tax Credit available and the same will be carried forward to the next month. The Input Tax Credit carried forward to the next months will be adjusted in the ensuing months. Thus the VAT liability will be calculated only after applying the above procedure at the end of the calendar month and VAT liability arises on the first day of the ensuing month in case of running concern. Reply From: ABHIVIRTHI Tax and Industrial Consultancy R.R.JAGADEESAN VAT PRACTITIONER AND INDUSTRIAL CONSULTANT H-63, Palaami Enclave, New Natham Road Madurai-625014. Cell: 9994990599
The types of VAT........ 1 ) INPUT VAT @ 4 % 2 ) INPUT VAT @ 1 % 3 ) INPUT VAT @ 12.5 % 4 ) OUTPUT VAT @ 1 % 5 ) OUTPUT VAT @ 4 % 6 ) OUTPUT VAT @ 12.5 %