Scenario:
Jemm
Ltd has just bought a machine for £30,000 net for company use and paid VAT on
the purchase and the total amount was paid through the bank account
immediately. What will be the double entry posting for this?
Ltd has just bought a machine for £30,000 net for company use and paid VAT on
the purchase and the total amount was paid through the bank account
immediately. What will be the double entry posting for this?
Double entry posting:
DR:
Machine account £30,000
Machine account £30,000
DR:
VAT account £6,000
VAT account £6,000
CR:
Bank account £36,000
Bank account £36,000
Reason:
The
machine account has been debited because machines are increasing and if an
asset is increasing we debit the relevant asset account and we have debited VAT
account with 20% of £30000; because VAT on purchases is an asset which can be
claimed back from HMRC and the amount to be claimed back is obviously
increasing due to this additional purchase.
machine account has been debited because machines are increasing and if an
asset is increasing we debit the relevant asset account and we have debited VAT
account with 20% of £30000; because VAT on purchases is an asset which can be
claimed back from HMRC and the amount to be claimed back is obviously
increasing due to this additional purchase.
We
have credited bank because bank account is paying out money and the balance in
the bank account is reducing; if an asset is decreasing, we credit the relevant
asset account.
have credited bank because bank account is paying out money and the balance in
the bank account is reducing; if an asset is decreasing, we credit the relevant
asset account.
REMEMBER:
DEAD/CLIC
Yours Sincerely,
The Friendly Team
The Friendly Team
The Training Place of Excellence Limited