Chapter 23 - VAT in Company Financial Statements

Question 1

For Standard Rate

Answer 1

VAT on outputs:
- DR Debtors (gross amount - 120%)
- CR VAT account (VAT - 20%)
- CR Sales (net amount - 100%)
VAT on inputs:
- DR Purchasers/expenses (net amounts - 100%)
- DR VAT account (VAT - 20%)
- CR Creditors (Gross amount - 120%)
Change amounts for different rates

Question 2

VAT Control Account

Answer 2

Balance sheet T account, keeps track of amounts which are owed to HMRC on sales made and amounts which are recoverable from HMRC on purchases of goods for resale, purchases on fixed assets and expenses.

Question 3

VAT Control Account T. Account

Answer 3

T account is in the memory joggers.
Account may have a balance b/d on the debit side which means HMRC owes the business VAT back.
Amounts on sales and purchase invoices are stated inclusive of VAT. The VAT element is calculated as VAT rate / (100 + VAT rate) x the VAT inclusive amount

Question 4

Flat Rate Scheme Accounting

Answer 4

VAT on outputs:

• DR debtors (gross of VAT)
• CR VAT account (VAT flat rate %)
• CR Sales (Gross of VAT less flat rate %)

VAT on inputs:

• DR purchases / expenses (gross of VAT)
• Cr Creditors (gross of VAT)