VAT

Question 1

Agency method

Answer 1

invoice addressed to client

bill it to client included VAT ie gross amount

Question 2

Principal method

Answer 2

invoice addressed to firm

must record VAT element in HMRC ledger

Question 3

Principal method - paying bill

Answer 3

Client ledger - Office column - net amount DEBIT
(Client ledger - Note of VAT paid)
Cash ledger - Office column - net amount CREDIT
HMRC ledger - VAT amount-DEBIT
Cash ledger - Office column - VAT amount - CREDIT

Question 4

Principal method - invoicing client

Answer 4

check client ledger for Notes of VAT paid
add VAT to bill
Client ledger - Office Column - net costs - DEBIT
Client ledger - Office Column - all Notes of VAT paid recorded as one transaction - DEBIT
HMRC ledger - individual entries of all Notes of VAT paid - CREDIT
COSTS - amount of bill - CREDIT