MVAT ACT, 2002
Ø Purpose
·
To
compile and simplify the Accounting Process and Accounting Entries required in
recording the transactions of VAT.
Ø Situations
1.
When
a Purchase is made say of Rs. 100 and Vat applicable is 4% i.e. Rs.4. So the
total amount of the invoice will be Rs.104 and the accounting entry will be:-
Purchase
a\c………………………….Dr. 100
Input Vat 4%
A/c……………………Dr. 04
To Supplier A/c 104
2.
When
a Sale is made say of Rs. 100 and Vat applicable is 12.5% i.e. Rs.12.5. So the
total amount of the invoice will be Rs.112.5 and the accounting entry will be:-
Party
a\c………………………….Dr. 112.5
To Sales A/c 100
To Output Vat12.5% A/c 12.5
3.
Transfer
the Input & Output Vat to the Vat A/c, the entry will be:-
§ Output Vat12.5% A/c…………….Dr. 12.5
To Vat A/c 12.5
§ Vat A/c ……………………………Dr. 04
To Input Vat4% A/c 04
4.
By
incorporating the above entries, we will get a liability(Output-Input, i.e.
12.5-4= Rs.8.5). This liability, after submitting the returns have to be paid,
the entry will be:-
Vat A/c………………..Dr. 8.5
To Cash/Bank A/c 8.5.
5.
In
case, Input Vat is greater than Output Vat i.e. if there is a refund say of
Rs.8.5, then the accounting entry will be:-
Vat Receivable A/c…….Dr. 8.5
To
Vat A/c 8.5
Here, the ledger Vat Receivable will be created as we don’t
get the refund instantly. Vat Receivable will be created under Current assets
and will be shown in Asset side of the Balance Sheet. And when we will get the
refund, the accounting entry will be:-
Cash/Bank
A/c…….Dr. 8.5
To
Vat Receivable A/c 8.5.
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