What would be journal entry for purchase invoice

Tushar Dave (AVP) (33 Points)

08 April 2014  

For e.g. I purchase goods worth 5 lakhs from ABC Co. and i get purchase invoice for it. Now, in the bill, goods are worth 4.5 lakhs and 25 thousand is for Service Tax and 25 thousand is for VAT. This is just a example. In this case, when i am passing journal entry, what would be the journal entry. Should there be a seperate legder for the Service Tax and VAT or not. Because, in the end, i have to pay 5 lakh to ABC Co. so whats the point of passing a journal entry for Service Tax and VAT. 

 

According to me, To Purchase A/C 5 lakh and By ABC Co. 5 lakh

but my friend says, To Purchase A/C 4.5, To Service Tax 25k, To VAT 25k and By ABC 5 lakh.

 

Which one is correct or both of us are wrong?