SPECIAL TOPICS FOR MERCHANDISING

VALUE-ADDED TAX ENTRIES

The VAT rate in the Philippines is 12% based on taxable gross selling price of goods.

Sample Problem 1
The following are transactions pertaining to LUFFY COMPANY during the month of May 2020:
May 2 Purchased goods on account with a total invoice price of ₱560,000. Terms 2/10, n/30.
May 12 Paid cash from purchase on May 2.
May 15 Sales on account with invoice amounting to ₱896,000. Terms 2/10, n/30.
May 22 Received cash from sale on May 15.
May 31 Paid the VAT due.

Entries:

Date Particulars PR Debit Credit

2020
May 2 Purchases (₱560,000 / 112%) ₱500,000
Input Tax (₱500,000 x 12%) 60,000
Accounts Payable ₱560,000
Purchases on account.

May 12 Accounts Payable 560,000

Purchase Discount (₱500,000 x 2%) 10,000
Input Tax (₱10,000 x 12%) 1,200
Cash 548,800
Paid on account.
May 15 Accounts Receivable 896,000
Sales (₱896,000 / 112%) 800,000
Output Tax (₱800,000 x 12%) 96,000
Sales on account.

May 22 Cash 878,080

Sales Discount (₱800,000 x 2%) 16,000
Output Tax (₱16,000 x 12%) 1,920
Accounts Receivable 896,000
Collection on account.

May 31 Output Tax (₱96,000 - ₱1,920) 94,080

Input Tax (₱60,000 - ₱1,200) 58,800
VAT Payable 35,280
To record VAT payable.

May 31 VAT Payable 35,280

Cash in Bank 35,280
Paid VAT due to BIR.