To account for
When goods are sold the net amount will be credited to Sales. The extra charge to the customer (the
When invoices are received from suppliers the net amount will be debited to the appropriate expense account. The extra charge by the supplier (the
At the end of the quarter the balance in the
|
[{m}.{s}a]
Credit balance in the account: we have a liability (creditor).
Output
Debit balance in the account: we have an asset (debtor).
Input
It is possible to keep two
We will now look at the recording of a series of transactions. In particular we will show the entries being made in the
The balance due to HM Revenue & Customs at 1 March is £1,025.
We will now look at the transactions for March and the journal entries to record them.
|
[{m}.{s}b]
Transaction 1: An invoice is received for goods for resale:
——— INVOICE | |||
---|---|---|---|
———— | Date: 10 Mar Order No:—— | ||
Invoice Number: | |||
Goods | 1,080 | ||
Net | 1,080 | ||
+ |
108 | ||
Gross | 1,188 | ||
[{m}.{s}d]
Transaction 2: A telephone bill is received:
——— INVOICE | |||
---|---|---|---|
———— | Date: 25 Mar Order No:—— | ||
Invoice Number: | |||
Rental & Calls | 120 | ||
Net | 120 | ||
+ |
12 | ||
Gross | 132 | ||
[{m}.{s}f]
A cheque for £1,025 for the
[{m}.{s}h]
Transaction 4: Credit sales for the month total:
Date Mar 31 | Monthly credit sales | ||
Net | VAT | Gross | |
——— | ——— | ——— | ——— |
——— | ——— | ——— | ——— |
TOTAL | 2,460 | 246 | 2,706 |
[{m}.{s}j]
Transaction 5: Cash sales for the month total:
Date Mar 31 | Monthly cash sales | ||
Net | VAT | Gross | |
——— | ——— | ——— | ——— |
——— | ——— | ——— | ——— |
TOTAL | 800 | 80 | 880 |
[{m}.{s}l]
Transaction 6: On 31 March, a cheque for £22 is paid for petrol for the business van.
[{m}.{s}n]
At 31 March we can calculate the balance in the account.
This balance is the net of:
Output |
326 |
less Input VAT (108 + 12 + 2) = | 122 |
204 | |
Once the entries have been made for April and May, the balance in the account will be the output
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[{m}.{s}p]