I am very confused with VAT here, and couldn’t find anything on forums or docs my situation is:
I have 12% VAT on sale which i have added in rules and is calculated so no problem here
I have 12% of government price of goods on purchase (not 12% of actual price but much higher)
So now I should pay the difference between the two as VAT
1- does the system calculate the difference?
2- how to i input the manual vat on purchases?
3- how to i input the payment of the vat payed?
tnx aa lot
Hey, usually you record the purchase tax as an asset and the sales tax as a liability. At the end of the period you can book the difference into a VAT payable account (the first two become 0 again). When you record the payment you’re moving money from the bank into VAT payable.
I hope that’s understandable, I don’t know the accountant lingo.
But doesn’t the system automatically do that when I use VAT tax?
There is a Tax Asset 1500 category which is empty!!
you should know i use everything as defaults so i prefer to rely on the system.
I would be using LCV to add these costs, It’s part of the stock value for me.
If you could elaborate in more details the steps for a noob it would be great.
P.S. thank good you don;t know accounting lingo it would only confuse me.
usually you record the purchase tax as an asset and the sales tax as a liability
This part is done automatically, if everything is configured correctly. Everything else you’ll have to do manually.
You can find more information here:
to Sum up for future readers, and please tell me if I understood correctly:
1-in Assets under Tax assets create a ledger (for example VAT Paid) with account type Tax to use for purchase VAT
2-Use the default VAT ledger for sales VAT
3-Book the difference in an account VAT payable (what type and where should it be?)
4-Make payment entry to this account by GL entry or invoice.
Would be great if someone more knowledgeable can confirm or correct this.
was wondering if anyone experienced can confirm this.
What you’re describing is definitely one way it is commonly done. There’s a lot of variation, though, so your best bet is to confirm with an accountant familiar with local practices.
In any event, your VAT payable account should just be a regular liability account.