VAT Control Account

A VAT control account is indeed one of the most useful tools that businesses in South Africa should definitely benefit from. It helps count the VAT with every business transaction made. Hence, you won’t have to manually calculate the VAT every time a new transaction is made.
Tax evasion is a serious crime and many companies end up getting themselves into expensive lawsuits mainly due to late payment or non-compliance of VAT laws. Businesses lose their goodwill within days and their share price drops if word gets out that it does not comply with tax laws.
What is a VAT Control Account?
A VAT control account is a kind of central repository for all activities and transactions related to taxation. It helps ensure that all the tax liabilities and refund claims are effectively and accurately recorded on a timely basis.
For small businesses, keeping track of tax transactions could be very easy, however, for larger businesses with more complex business transactions and capital ventures, calculating VAT can be very hard. Hence, a VAT control account is used as a record-keeping tool. It helps monitor business transactions and comply with VAT regulations. Now we will discuss about VAT control account format in the following heading.
VAT Control Account Format
VAT control account follows the rules of VAT double entry. It has two sides, Debit side and Credit side. Here is the description of VAT control account format in easy way
Side | Description | Common Entries |
---|---|---|
Debit side | Records input VAT (VAT paid on purchases and expenses). | – Purchases day book |
– Cash book payments | ||
– VAT on sales returns | ||
Credit Side | Records output VAT (VAT collected on sales). | – Sales day book |
– Cash sales in the cash book | ||
– VAT from purchase returns |
If you have done any mistake then there is no need to worry, you can make corrections through VAT journal Entries. It is used to adjust and fix errors and bad write-offs. These can be appear either on debit or credit card depending on adjustments.
Significance of a VAT Control Account
1. Accurate VAT Reporting
With the help of a VAT control account, you can ensure that VAT is accurately recorded and that too on a timely basis. This feature helps avoid unnecessary tax-related contingencies that might arise due to non-compliance with tax laws in South Africa.
2. Tracking VAT Transactions
A business undergoes thousands of transactions every day thus keeping track of VAT of all these transactions physically can be a very confusing task. However, a VAT control account bridges the gap and automatically caters to the taxation impact of every transaction immediately.
3. Effective Cash Flow Management
A VAT control account also helps with effective cash flow management as it helps reconcile VAT payments and refunds. So, it means that the business would know how much tax is due and how a refund is claimable at all times.
So, it is safe to say that the VAT control account is indeed a very useful tool that helps businesses avoid needless tax contingencies. The business would have accurate figures of its VAT dues and claims at all times. Every transaction would be considered for this VAT calculation without any exclusions.
What is vat suspense?
Vat suspense means a temporary account that is used to record vat amount when there is any uncertainty or error about transaction happens.
IS vat a debit or credit?
VAT can be debit or credit both depending on transaction.
What is vat output account?
The VAT output account records the VAT collected on sales of goods or services, which you need to pay to HMRC