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Thread: Input & Output VAT

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    Input & Output VAT

    Hi, I'm battling to grasp the processing of these as well as their position in the accounting equation.

    Input VAT is paid to Suppliers.
    It's an Asset and is processed as a Debit on the General Journal.

    Output VAT is received from Customers.
    It's a Liability and is processed as a Credit on the General Journal.

    Is that correct?

    Grateful for any help in clarifying this conundrum for me!

    Kerry

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    Site Caretaker Dave A's Avatar
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    That sounds right, but doesn't Pastel sort that out for you pretty much automatically as you process invoices and bills?
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    Oh... that's right? Cool. Then I have it!

    No, Pastel does not. In a General Journal you still have to select whether you Debit or Credit.

    Thank you.

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    Gold Member Mark Atkinson's Avatar
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    Kerry,

    When you set up your company in Pastel you set up your tax processing. Pastel should adopt this tax processing when you are completing transactions on Pastel.

    So long as your defaults are correctly set up, you shouldn't have an issue.

    What is it that you're trying to put through the General Journal? Supplier/Customer transactions can all be done through the relative docs.

    As for your Input/Output VAT "conundrum", that's just about right. Things coming IN (purchases etc) to the business attract INput VAT. Things going OUT of the business (Sales etc) attract OUTput VAT.

    Your VAT Payable to SARS is Output VAT less Input VAT. (With a negative balance being VAT refundable.) So yes, Input VAT = Asset, Output VAT = Liability, if that's how you prefer to see it.
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    Thanks, Mark

    I do have Pastel set up, so it all works fine. I'm just trying to grasp the academics behind it! The Supplier-Input and Customer-Output classification is easy to find but the labels for Asset and Liability not so easy.

    Input being an Asset when I owe it and Output being a Liability when my head sees it more as an Asset (because I can offset it against the Input VAT) is not sitting well with me!

    I am, however, old enough to accept there are some things I just have to accept!

    Thanks for you help.
    Kerry

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    Full Member greghsa's Avatar
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    Easiest way to remember it is like this.

    If you receive(IN) an invoice (INbox,IN tray etc.) then it is INPUT VAT.
    If you send(OUT) an Invoice (OUTbox, OUT tray etc.) then it is OUTPUT VAT.

    So if you buy an asset you will get (IN) an invoice so it will be INPUT.
    (remember in Pastel to use Tax Type 05 as this is a capital expense)

    Hope this helps.

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    Thanks Greg, I can wrap my head around the In (through the door) and Out (through the door) concept; just trying to see why what I owe is an Asset and what I can claim is a Liability! (Some of us just don't think like you accountant types :-)

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    ... and Greg, thanks for that 05 Tax help, I completely missed that one. Big thanks!

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    Which code should Salaries & Wages go under? I've been using 00 but perhaps that's not right?

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    Full Member greghsa's Avatar
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    Quote Originally Posted by DaisyGirl View Post
    Which code should Salaries & Wages go under? I've been using 00 but perhaps that's not right?
    To claim (Tax Type 01) assuming that suppier/s are vat registered:
    Accounting fees
    Advertising
    Bad Debts(Tax Type 04)
    Cleaning Materials
    Delivery Vehicles
    Discount Allowed
    Electricity & Water
    First Aid expenses
    Insurance
    Legal Fees
    Maintenance & repairs
    Motor Vehicle Maintenance
    Office Furniture & Equipment
    Postage
    Purchases fore resale
    Security
    Staff Training
    Stationery & Printing
    Subscriptions & Levies
    Telephone, Faxes & Email
    Toll Fees
    Tools & Machinery

    What not to claim (Tax Type 00)
    Any personal expenses of owner
    Car purchases
    Depreciation
    Donations
    Entertainment
    Interest
    Medical Aid or Owner Medical Aid
    Milk, Bread, Vegtables, Rice, Cooking Oil
    Motor Vehicle licence
    PAYE & SITE
    Petrol & Diesel
    Pension & Provident funds
    Promotional Gifts
    Salaries & Wages
    Staff Tea & Refreshments
    UIF
    Any Vendor(Supplier) that is not registered for VAT.

  13. Thank given for this post:

    Dave A (14-Sep-10), pedrob (15-Sep-11)

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