Please guide me when booking a sales or purchase invoice the Tax (VAT) portion should be shown in P&L or is a part of Current liabilites, and only Net sales and Net purchases be shown in P& L a/c. What is correct? Any Accounting Standard has any mention on this aspect?
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Why vat amount is shown in duties & taxes?
Replies (2)
vat is a tax liability and this it is shown under current liabilities... only gross amt of sale and purchase before vat shall be shown in p&l a/c for accounting purpose.
Agreed with Tribhuvan Aditya Singh! I would like to add further. If the purchase invoice is of goods held for sale, then only you have to show the gross amount of purchases (which excludes VAT amount) in books. iHowever, if the purchase invoice is of things other than goods, e.g. bill of printing and stationery, then you have to show total amount (which includes VAT) in books. This is because one cannot claim credit for VAT paid on goods consumed, so here VAT will be your expense, hence full amount of such bill of printing and stationery have to be shown in P & L A/c.
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