Scenario:
TalatLtd has just bought a machine for £17,000 net for company use and paid VAT on
the purchase and the total amount will be paid next month. What will be the
double entry posting for this?
Double entry posting:
DR:
Machine account £17,000
Machine account £17,000
DR:
VAT account £3,400
VAT account £3,400
CR:
PLCA £20,400
PLCA £20,400
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 £17,000; 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 £17,000; 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.
Purchases
ledger control account (PLCA) because the company hasn’t paid for the machine
and the full amount is currently outstanding and this is a liability. Hence the
liability is increasing, and if a liability is increasing, we credit the
relevant liability account.
ledger control account (PLCA) because the company hasn’t paid for the machine
and the full amount is currently outstanding and this is a liability. Hence the
liability is increasing, and if a liability is increasing, we credit the
relevant liability account.
REMEMBER:
DEAD/CLIC
N/B:
PLCA
is also called Creditors Control Account/ Trade Payables Account
is also called Creditors Control Account/ Trade Payables Account
Yours Sincerely,
The Friendly Team
The Training Place of Excellence Limited