Accounting for VAT payments

billygreenway · ‎February 03, 2022

I am a business that is not registered for VAT and as such have made VAT payments on import of inventory purchases.

Should VAT be accounted as a Cost of Goods Sold or as an expense?

John C · ‎February 04, 2022

Hi billygreenway You could create a specific cost of goods account for the VAT element of the transaction. As we're not accountants any information that we provide should be qualified by a professional. There may however be an accountant/professional here on the Community that you provide you with further advice.

View solution in original post

Ashleigh1 · ‎February 03, 2022

Hello Billygreenway,

Welcome to the Community page,

So it is an expense as you have brought the item and have imported it.

billygreenway · ‎February 03, 2022

Why is it not cost of goods sold? Since if I bought an item that included VAT and then resold it then it would count as a cost of goods sold?

John C · ‎February 04, 2022

Hi billygreenway You could create a specific cost of goods account for the VAT element of the transaction. As we're not accountants any information that we provide should be qualified by a professional. There may however be an accountant/professional here on the Community that you provide you with further advice.

billygreenway · ‎February 04, 2022

Thanks for your help! That makes sense - will see what I can do!

paul72 · ‎February 04, 2022

Hi @billygreenway

If you aren't VAT registered then there's no need to think about or separate VAT at all.

Just enter the line on the bill as the total cost (no need for a separate line showing VAT).

If you want to enter as a separate line, enter the VAT in the same category/account as the purchase itself.

Hope this helps.

Topics

Training

Community

Resources

Accounting for VAT payments