In case of capital goods, only the amount of fixed asset purchased has to be capitalised and not the vat amount if the vat portion is taken for input credit purposes.
Similarly in case of purchase of raw material, vat paid will be taken as input credit and whether purchases has to be accounted excluding vat portion?
Since two benefits are availed: one is vat input credit and other one is, vat on purchases is also claimed as expense.
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Accounting of purchases under VAT Input Credit
Replies (2)
Yes purchases will be excluding the Vat Amount.
Yes of course there will be no entry of vat in the purchase account , in this case the following will be the accounting entry :
Dr. Purchases
Dr. Input Vat
Cr, Cash/Creditor
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