VAT on Sales

Anglo-Spanish Chartered Accountants

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VAT on Sales

When we make a supply that is subject to VAT, we add VAT to the price agreed with our clients. Therefore, when we receive payment from our clients, we receive our fees and the VAT. This VAT belongs to the tax office and should therefore be passed on at the end of the current reporting period. An example would be as follows:

Sales invoice issued    
  Invoice Our money VAT - Tax office money
Sales 3,000 3,000  
VAT @ 16% 480   480
  3,480 3,000 480


When the sale has been completed, our profit is €3,000:


Profit and loss account
Sales 3,000
Profit / (Loss) 3,000


However, we have collected from our client our money and the VAT that becomes a creditor to be paid at a later date:


Balance Sheet      
  Profit Bank VAT Creditor
Sales Invoice 3,000 3,480 480
  3,000 3,480 480
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