Value Added Tax VAT VAT Calculation VAT Return

VAT • Value added tax (VAT) is a tax on consumer expenditure. It is

DEAD/ CLIC • DEAD stands for: • CLIC stands for: • • Debit Expenses

This shows that: • VAT on Sales • VAT on Purchases amount Liability (CLIC)

Imagine you work for J&N Ltd, a company that sells kitchen utensils. The following

Purchase invoice ARTEL LIMITED 114 Milly Drive Way, London. N 4 3 TT Invoice

VAT on Sales £ 843. 30 (£ 107. 30 + £ 736) Liability VAT

VAT RETURN FORM (Extract) VAT due in this period on sales and other outputs

Here at The Training Place of Excellence, we aim at giving people a good

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Value Added Tax (VAT) VAT Calculation & VAT Return form

VAT • Value added tax (VAT) is a tax on consumer expenditure. It is a tax levied by the government on the sale of goods and services within the community, and so is an indirect tax levied on the consumers. It is mainly made up of: VAT on Sales LIABILITY because it is owed to HMRC VAT on Purchases ASSET because it is claimed back from HMRC VAT Payable/ Reclaimable

DEAD/ CLIC • DEAD stands for: • CLIC stands for: • • Debit Expenses Assets Drawings • DEBIT TRANSACTIONS • If any of these are increasing, you will need to debit the account Credit Liabilities Income Capital • CREDIT TRANSACTIONS • If any of these are increasing, you will need to credit the account

This shows that: • VAT on Sales • VAT on Purchases amount Liability (CLIC) Asset (DEAD) will be credited with the TOTAL VAT on Sales amount will be debited with the TOTAL VAT on Purchases

Imagine you work for J&N Ltd, a company that sells kitchen utensils. The following two Sales Invoices, and one Purchases Invoice were dealt with in the accounting period. What will be the VAT accounting treatment for these?

Purchase invoice ARTEL LIMITED 114 Milly Drive Way, London. N 4 3 TT Invoice To: J & N Limited 12 New Cross Road London, SW 1 3 HH Description Quantity Unit Price Net Amount A 4 Envelopes 50 £ 40. 19 £ 2, 009. 50 A 6 Envelopes 30 £ 30. 76 £ 922. 80 Total Net Amount VAT @ 20% Amount Due Invoice amount payable in 30 days £ 2, 932. 30 £ 586. 46 £ 3, 518. 76

VAT on Sales £ 843. 30 (£ 107. 30 + £ 736) Liability VAT on Purchases £ 586. 46 Asset VAT Payable £ 256. 84

VAT RETURN FORM (Extract) VAT due in this period on sales and other outputs (Box 1) £ 843. 30 VAT due in this period on acquisitions from other EC Member States (Box 2) £ 0 Total VAT due (the sum of boxes 1 and 2) (Box 3) £ 843. 30 VAT reclaimed in the period on purchases and other inputs (including acquisitions from the EC) (Box 4) £ 586. 46 Net VAT to be paid to HM Revenue & Customs or reclaimed by you (Difference between boxes 3 and 4) (Box 5) £ 256. 84

Here at The Training Place of Excellence, we aim at giving people a good understanding of accounts and in doing this; we always try to connect the teaching to the real world.