Very urgent audit query

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2011 Dear Experts,

I have a query regarding the disclosure and accounting treatment in the books of accounts.

A client follows exclusive method of accounting for VAT (does not show it in trading and profit and loss account and directly shows in balance sheet )

His Input Vat Credit on Purchases & the VAT paid in cash (Challan paid) is more than the Output Vat on Sales. Initially at the time of filing of VAT return for the 01.10.2010 to 31.03.2011 he has paid Challan. Then subsequently he received some of the purchase bills that were yet to be received at the time of VAT return filing. So basically, now his set-off has increased and the position now is to claim refund of VAT.

We cannot disclose both, VAT provision & VAT receivable in the same balance sheet for the same year. So, how to disclose this in balance sheet.

Example with figures:

Position at the time of Return filing:

Input VAT credit on Purchases Rs, 100/-
Output VAT payable on Sales Rs. 120/-
So, Rs. 20/- paid in cash – This will be the Provision for VAT.

Then some purchase bills are received and the Input VAT credit now is Rs. 115/- & challan paid Rs. 20/- totaling to Rs. 135/- & Output VAT is same at Rs. 120/-, so now the position is VAT refund of Rs. 15/-

Now challan paid Rs. 20/- will be in Provision & Rs. 15/- will be in refund.

Kindly guide how to disclose this in the balance sheet. Can we disclose both the Provision or Receivable? This is an Audit case. Kindly do the needful.

Ravi

Ravi (Expert)
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18 September 2011 your VAT provision has cr balance of Rs. 15 and your Receivable of VAT is Rs. 20 has dr. balance

here you can have an option to pass Journal entry for showing the net balance on the balance sheet and set off those account against each other account and show the balance on the respective side

Dr. balance then Asset side as Receivable
Cr. Balance then Credit side as Provision

in your case i.e in your above example you can show the Rs.5 will be Liabilities side

CA. Nitin Agrawal

CA. Nitin Agrawal (Expert)
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18 September 2011 Dear Anonymous

Its very simple case that you have not received/ booked some purchase bill at the time of submitting VAT return.

You need to pass purchase entry only for the bill not booked i.e

Purchase A/c Dr.
Input Vat. A/c Dr.
To Supplier A/c

There is no need to pass any further entry for the VAT challan paid in cash, because the entry passed is correct. Since you have paid the VAT in cash i thisnk you have not passes any provision entry.

Further you need to make revision/ correction in VAT return submitted.

Now cheers

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