Introduction

Topic Outline:

 Sources of output VAT

 Transactions deemed sales
 Zero-rated sales
 Sources of input VAT
 VAT on importation
 Presumptive, transitional and standard input VAT
 Computation of value-added tax due
 Filing and payment of value-added tax

Value-Added Tax

Value-Added Tax (VAT) is a tax on consumption levied on the sale, barter, exchange or lease
of goods or properties and services in the Philippines and on importation of goods into the
Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or
lessee of goods, properties or services.

Characteristics of Value-Added Tax

 Tax on consumption
 Indirect tax
 Privilege tax
 Ad-valorem tax
 Proportional tax

Illustration 1:
Maria sold a burger to Pedro for P100, plus P12 VAT.
Pedro sold the burger to Juan for P200, plus P24 VAT.

SCOPE OF VALUE ADDED TAX

A. Sale, barter or exchange of goods and properties in the course of trade or business
B. Sale of services or similar transactions in the course of trade or business
C. Lease of goods and properties in the course of trade or business
D. Importation of goods, whether or not in the course of trade or business

WHO ARE REQUIRED TO FILE VAT RETURNS?

 Any person or entity who, in the course of his trade or business, sells, barters,
exchanges, leases goods or properties and renders services subject to VAT, if the
aggregate amount of actual gross sales or receipts exceed Three Million Pesos
 (Php3,000,000.00) (For radio or TV franchise grantees, the VAT threshold is P10
million.)
 A person required to register as VAT taxpayer but failed to register
 Any person, whether or not made in the course of his trade or business, who imports
goods

REGISTRATION

A.    Mandatory Registration

 Businesses with actual or projected gross sales or receipts exceeding P3 million

 Businesses required to register as VAT taxpayer but failed to register
 Radio or television broadcasting companies with gross receipts exceeding P10
million

B.    Voluntary Registration

 Businesses which are VAT-exempt or not required to register

 Businesses with VAT-exempt transactions
 Radio or television broadcasting companies with gross receipts not exceeding P10
million
 Not allowed to cancel VAT registration for the next three (3) years

C.    Cancellation of VAT Registration

 Businesses with gross sales or receipts will not exceed P3 million

 Businesses that will cease operation, and will not re-operate within 12 months

Illustration 2:
Goods bought for P100 and sold for P120.
Non-VAT Percentage
(P120 x 3%) P3.60
tax payable 
Value-added tax payable:
Output VAT (P120 x 12%)   P14.40
Input VAT (P100 x 12%) (12.00)
Value-added tax payable (P20 x 12%) P2.40

Illustration 3:
Goods bought for P100 and sold for P100.
Non-VAT Percentage
(P100 x 3%) P3.00
tax payable 
Value-added tax payable:
Output VAT (P100 x 12%)   P12.00
Input VAT (P100 x 12%) (12.00)
Value-added tax payable (P0 x 12%) P0.00

VALUE-ADDED TAX RATES

 On sale of goods and properties - twelve percent (12%) of the gross selling price
or gross value in money of the goods or properties sold, bartered or exchanged
 On sale of services and use or lease of properties - twelve percent (12%) of gross
receipts derived from the sale or exchange of services, including the use or lease of
properties
 On importation of goods - twelve percent (12%) based on the total value used by
the Bureau of Customs in determining tariff and customs duties, plus customs duties,
excise taxes, if any, and other charges, such as tax to be paid by the importer prior to
the release of such goods from customs custody; provided, that where the customs
duties are determined on the basis of quantity or volume of the goods, the VAT shall
be based on the landed cost plus excise taxes, if any.
 On export sales and other zero-rated sales - 0%

VAT Payable Basic Computation:

Sales or
   x 12%      Output VAT  
receipts   
Purchases x 12% (Input VAT)
Gross profit x 12% VAT Payable

Example computation of VAT of Pedro:

Sales    P200     x 12%      P24  
Purchases  100   x 12%       (12)  
Gross
 100   x 12% P12  
profit

Output VAT

Classification of Sales of VAT Taxpayers

1. Actual Sales/Receipts
2. Transaction Deemed Sales*
3. Zero-Rated Sales/Receipts
4. Exempt Sales/Receipts

Actual Sales or Receipts:

a. Sale of goods - 12% of gross sales

b. Sale of services - 12% of gross receipts
o Includes lease of properties, sales by a dealer of securities
c. Sale of real properties - 12% of gross selling price
 o Gross selling price: whichever is highest of the selling price, zonal value or
assessor value

Goods or properties – tangible and intangible objects which are capable of pecuniary estimation
and shall include, among others:

1. Real properties held primarily for sale to customers or held for lease in the ordinary
course of business
2. The right or the privilege to use patent, copyright, design or model, plan, secret formula
or process, goodwill, trademark, trade brand or other like property or right
3. The right or privilege to use any industrial, commercial or scientific equipment
4. The right or the privilege to use motion picture films, film tapes and discs, and
5. Radio, television, satellite transmission and cable television time

Gross selling price  means the total amount of money or its equivalent which the purchaser pays
or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or
properties, excluding VAT.  The excise tax,if any, on such goods or properties shall form part of
the gross selling price.

Exchange of services – the performance of all kinds of services in the Philippines for others for
a fee, remuneration or consideration, whether in kind or in cash, including those performed or
rendered by construction contractors, stock and real estate brokers, lessors or property, persons
engaged in warehousing, milling, manufacturing, hotels and restaurant services, dealers in
securities, lending investors, transportation contractors, sellers of electricity, franchise grantees,
non-life insurance companies, lessors of goods or properties and other similar services regardless
of whether or not the performance thereof calls for the exercise of use of the physical or mental
faculties.

Gross receipts means the total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or constructively received during
the taxable quarter for the services performed or to be performed for another person, excluding
value-added tax.

Constructive receipt occurs when the money or consideration or its equivalent is placed at the
control of the person who rendered the service without restrictions by the payor.
Illustrations:
Company A: Seller of goods
Sale of goods: P500,000
Collection:  P300,000

Company B:  Seller of services

Revenues from services:  P500,000
Collection:  P300,000

Company C:  Lessor of real property

Lease of real property:  P500,000
Collection:  P300,000

Company D: Seller of real property

Proceeds from sale of real property:  P1,000,000
Fair market value as per BIR zonal valuation:  P1,200,000
Fair market value as per LGU assessor valuation: P1,100,000

Computation of VAT:
Sales of P200,000 exclusive of VAT.
VAT = P200,000   x 12% = P24,000

Sales of P500,000 inclusive of VAT.

VAT = P500,000 / 1.12 x 12% = P54,000
VAT = P500,000  x 12 ÷ 112   = P54,000
VAT = P500,000     x 3/28       = P54,000

Transactions Deemed Sales:

1. Transfer, use or consumption, not in the ordinary course of business of goods or

properties ordinarily held for sale or use in the course of business
2. Distribution or transfer of inventory to
 shareholders or investors for their shares in the profits
 creditors in payment of debt
3. Consignment of goods if actual sale is not made within 60 days
4. Retirement from or cessation of business, with respect to goods on hand
 Change in ownership of business
 Dissolution of a partnership
 Incorporation of a sole proprietorship

5. Changes in or cessation of status of VAT registration, with respect to goods on hand

 VAT to non-VAT
 VAT to exempt
Zero-Rated Sales:
The following sales of goods and services by VAT-registered persons shall be subject to zero
percent (0%) rate:

a. Actual export sales

b. Constructive export sales
 Eco-zone-registered companies (PEZA, TIEZA, etc.)
c. Sales to entities which are exempt under special laws or international agreements, such as
 ADB, IRRI, PNRC
 UNO, WHO, UNICEF
 Foreign country embassies in the Philippines
d. Sales of goods and services to international shipping or air transport service companies
e. Transport of passengers and cargo by domestic air or sea carriers from the Philippines to
a foreign country.
f. Sales of power or fuel generated through renewable sources of energy

Domestic Carriers
Passengers  Cargoes 

VAT-
Land 3% CCT
able

Sea or air

 Domestic VAT
VAT
 International
0% VAT 0% VAT
Outgoing
Exempt
 International Exempt
Incoming

International Carriers

Passengers  Cargoes 

Sea or air

 International 3% CCT
Exempt
Outgoing
Exempt Exempt
 International
Incoming

Export sales by persons who are

 Non-VAT-registered    = exempt (but not allowed input tax credit)

  VAT-registered           = zero-rated VAT (allowed input tax credit)

Non-
Registration VAT
VAT

0%
Taxation Exempt
VAT

Output VAT 0 0

Input VAT 0 120

VAT Payable
(Refundable or 0 (120)
Creditable)

Input VAT attributable to zero-rated sales may be

o Refunded, or
o Claimed as input tax on domestic sales, or
o Claimed as tax credit against any other NIRC tax

Input VAT

 Sources of Input VAT

1. Local purchases of goods and services

2. Importation
3. Acquisition of capital goods
4. Presumptive Input Tax
5. Transitional Input Tax
6. Standard Input Tax

Requisites for Claiming Input VAT:

 Supported by VAT invoice from VAT-registered suppliers

 Related to VATable sales, not from exempt sales
 Paid or incurred in the course of trade or business

Local purchases of goods and services

 Goods for sale or for use in the business

 Services availed by the business

Importation
  Goods:  12% on (landed cost + excise tax)
 Services:  12% of gross payments

Illustration 1:
Company A imported goods for its business operations goods costing P1 million. The
computation of the VAT on importation is as follows:

Purchase price P   1,000,000

Add:  Other acquisition costs 70,000
Dutiable Value P 1,070,000
Add:  Customs Duty & other
321,730
charges
Total Landed Cost P 1,391,730
Add:  Excise Tax 100,000
VAT Base P 1,491,730
VAT Rate 12%
Value-Added Tax P    179,008

Illustration 2:
Company B has hired a foreign company to assist in installing a high technology equipment in its
laboratory. The agreed contract price is P500,000.

The value added tax on the importation of services is P60,000.

Acquisition of capital goods

 Capital goods - goods or properties with estimated useful life (EUL) of more than 1 year
and are treated as depreciable assets under our tax code.
 For capital goods with total purchase price during the month not exceeding P1 million,
the total input VAT is recognized as input VAT during the month of acquisition.
 For capital goods with total price during the month exceeding P1 million, spread the total
input VAT over EUL not exceeding 60 months
 Allocation allowed only until Dec 31, 2021. Thereafter, outright during the month of
acquisition

Illustration:

Capital goods were purchased for P5,000,000. Input VAT is P600,000.

If the EUL is 4 years, the input VAT shall be allocated equally over the period of 4 years or 48
months. The monthly input VAT to be recognized is P12,500.

If the EUL is 6 years, the input VAT shall be allocated equally over the period of 5 years or 60
months. The monthly input VAT to be recognized is P10,000.

4% Presumptive Input Tax

 Applicable to
 o Processors of sardines, mackerel and milk and
o Manufacturers of cooking oil, packed instant noodles and refined sugar
 4% of primary agricultural products which are used in the production

Illustration:

444 Sardines Manufacturing:

P
Sales
5,000,000

Purchases of fresh fish 1,000,000

Purchases of tomatoes and other vegetables 1,000,000

Purchases of cans and other packaging

800,000
materials

The presumptive input VAT is P40,000 and the total input VAT is P136,000. The VAT payable
is P464,000.
Transitional Input Tax

 Applicable to taxpayers who becomes liable to VAT, and those who elect to be VAT-
registered
 2% or actual VAT, whichever is higher

Illustration:

Company C

Actual
Value 2% TIT
VAT

P    P
Goods with VAT P 12,000
100,000 2,000

Goods without
 100,000    2,000
VAT

P
Total P 12,000 P 4,000
200,000

The transitional input tax will be P12,000.

Company D
 Actual
Value 2% TIT
VAT

P    P
Goods with VAT P 12,000
100,000 2,000

Goods without
 800,000    16,000
VAT

P
Total P 12,000 P 18,000
900,000

The transitional input tax will be P18,000.

7% Standard Input Tax

 Arising from sales to the government

Illustration:

Company E sold goods to the local government of Puerto Princesa amounting to P1 million,
excluding VAT.

a. How much is the total invoice amount?

b. How much will be collected by Company E from the local government?
c. How much is the standard input tax and the VAT due?

Answers:

a. Total invoice amount = P1 million selling price + P120,000 VAT = P1,120,000

b. Collection = P1,120,000 - 5% Final Withholding Tax of P50,000 = P1,070,000
c. SIT and VAT Due:

P1,000,00  P120,00
Output tax  12% 
0 0

Less:  Standard input tax 1,000,000 7% 70,000

VAT Payable 50,000

Less:  Final VAT

50,000
Withheld 

VAT Due 0

Exercise Problems
1.  The taxpayers had the following sales last year. Indicate whether the taxpayer is subject to
VAT, Non-VAT or Exempt. Assume the taxpayers are of independent situations.

Gross VAT- Non-VAT

Receipts Registered Registered
John P   100,000
Peter   1,000,000
 Joe  2,000,000    
Mary 3,000,001

2.  Determine the business tax applicable to each case of rental of real property:

Cas Monthly Rent per Aggregate Annual Applicable

Type
e Unit Rental Tax
A Residential P 14,000 P2,800,000
B Residential P 14,000 P3,200,000
C Residential P 16,000 P2,400,000
D Residential P 16,000 P3,600,000
E Commercial  P 14,000 P2,800,000
F Commercial  P 14,000 P3,200,000
G Commercial  P 16,000 P2,400,000
H Commercial  P 16,000 P3,600,000

3.  Compute the Value-Added Tax in each of the following cases:

a. Selling price, VAT not included, of P300.00

b. Selling price, VAT included, of P420.00
c. Selling price of P500.00 excluding VAT, and VAT passed on to buyer of P80.00

4.  A product has been sold to a senior citizen for P672.00 including VAT. How much will the
senior citizen pay?

5. A taxpayer had the following data:

Collections during the period 

Revenues of prior month   P 200,000
Revenues of the current month  300,000
Revenues of the next month 100,000

Required:  Compute for the business tax if the taxpayer is a

a.  Bus operator
b. Night club/bar
c. Cockpit
d. Basketball astrodome
e. Boxing arena
f. VAT-registered seller of goods
g. VAT-registered seller of services

6. Luigi is a registered broker of stocks listed and traded in the local stock exchange. He is not
engaged in dealing securities. Yesterday, he sold 20,000 shares of AssetPro Knowledge
Corporation for P8.00 per share. The shares have a par value of P6.00 and were previously
purchased for P7.00.

Required:  Determine the business tax due.

7. Miss Keem Chu, a TV and films artist, had the following data for the 2nd quarter of the
curre8t year. Assume that the amounts are exclusive of tax.

Receipts from talent fees   P4,800,000

Gross receipts from jeepneys (5 units) 1,200,000
Purchase of TV and film wardrobes 1,500,000
Purchase of jeepney spare parts 50,000
Promotion expenses for TV and film activities 150,000
Salary of drivers and mechanics 80,000
Insurance premium for jeepneys 30,000
Rent of office space used in both of her occupation and jeepney operations, subject
500,000
to VAT

Required:  Compute for the value-added tax payable of Ms. Keem Chu.

8. Mr. Tax operates two separate lines of business:  Panganan, a VAT-registered restaurant, and
Lambingan Videoke Bar. In the taxable period, the businesses had the follow data, exclusive of
VAT:

Pangana Lambinga
 Total
n n
Cash sales P 550,000 P 300,000  P   850,000
Credit card sales 150,000 200,000  350,000
Sales on
100,000 50,000  150,000
account 
 P1,350,00
P 800,000 P 550,000
0

Payment for operations expenses of Panganan is P600,000, 70% of which is to VAT suppliers.

Required:   Compute for the business taxes payable.

9. iTransporter Services is engaged in the land transport services from Ilocos Norte to any point
in the Philippines. It also has its own ferry boat which transport cargoes and passengers. During
the month, it had the following gross receipts, excluding taxes:

Land transport services:

Ilocos to Manila   P 800,000
Manila to Ilocos 700,000
Ferry boat services: Cargo Passengers
Batangas to Mindoro and vice versa  300,000 400,000
Sorsogon to Samar and vice versa 400,000 500,000
Payment of expenses to VAT sellers:
Services for repairs of transport units  200,000
Purchase of spare parts 300,000
Insurance of transport units 200,000
 Other expenses (70% from VAT
 900,000  
sellers)

Required:
a.  Compute for the business taxes payable if the land transport services are for cargoes.
b. Compute for the business taxes payable if the land transport services are for passengers.

Exercise Problems

Answers and Solutions

1.  The taxpayers had the following sales last year. Indicate whether the taxpayer is subject to
VAT, Non-VAT or Exempt. Assumed the taxpayers are independent of situations.

Gross VAT- Non-VAT

Receipts Registered Registered
John P   100,000 VAT Exempt
Peter   1,000,000 VAT Non-VAT
 Joe  2,000,000  VAT  Non-VAT
VAT
Mary 3,000,001 VAT
(without input tax)

2.  Determine the business tax applicable to each case of rental of real property:

Cas Monthly Rent per Aggregate Annual Applicable

Type
e Unit Rental Tax
A Residential P 14,000 P2,800,000 Exempt
B Residential P 14,000 P3,200,000 Exempt
 C Residential P 16,000 P2,400,000 PT     
D Residential P 16,000 P3,600,000          VAT
E Commercial  P 14,000 P2,800,000 PT    
F Commercial  P 14,000 P3,200,000          VAT
G Commercial  P 16,000 P2,400,000 PT    
H Commercial  P 16,000 P3,600,000          VAT

3.  Compute the Value-Added Tax in each of the following cases:

a. Selling price, VAT not included, of P300.00

b. Selling price, VAT included, of P420.00
c. Selling price of P500.00 excluding VAT, and VAT passed on to buyer of P80.00

Answers: 
a: P300.00 x 12% = P36.00
b: P420.00 x 3/28 = P45.00
c: P580.00 x 3/28 = P62.14

4.  A product has been sold to a senior citizen for P672.00 including VAT. How much will the
senior citizen pay?

Answer:

Selling price, net of

 (P672/1.12)   P600.00
VAT
Less:  Discount  (P600 x 20%)    120.00
Net Amount Due   P480.00

5. A taxpayer had the following data:

Collections during the period :

Revenues of prior month   P 200,000
Revenues of the current month  300,000
Revenues of the next month 100,000
Required:  Compute for the business tax if the taxpayer is a
a.  Bus operator
b. Night club/bar
c. Cockpit
d. Basketball astrodome
e. Boxing arena
f. VAT-registered seller of goods
g. VAT-registered seller of services
Answers:
a.  P600,000 x 3% = P18,000
b.  P600,000 x 18% = P108,000
c.  P600,000 x 18% = P108,000
d.  P600,000 x 15% = P90,000
e.  P600,000 x 10% = P60,000
f.   P300,000 x 12% =  P36,000
g.  P600,000 x 12% =  P72,000

6. Luigi is a registered broker of stocks listed and traded in the local stock exchange. He is not
engaged in dealing securities. Yesterday, he sold 20,000 shares of AssetPro Knowledge
Corporation for P8.00 per share. The shares have a par value of P6.00 and were previously
purchased for P7.00.

Required:  Determine the business tax due.

Answer:

Gross Receipts (20,000 shares x P8.00 per share)    P  160,000

Stocks Transactions Tax Rate   60% x 1%
Stocks Transactions Tax P    960

7. Miss Keem Chu, a TV and films artist, had the following data for the 2nd quarter of the
curre8t year. Assume that the amounts are exclusive of tax.

Receipts from talent fees   P4,800,000

Gross receipts from jeepneys (5 units) 1,200,000
Purchase of TV and film wardrobes 1,500,000
Purchase of jeepney spare parts 50,000
Promotion expenses for TV and film activities 150,000
Salary of drivers and mechanics 80,000
Insurance premium for jeepneys 30,000
Rent of office space used in both of her occupation and jeepney operations, subject
500,000
to VAT

Required:  Compute for the value-added tax payable of Ms. Keem Chu.

Answer:
VAT
Talent fees - Output VAT 4,800,000 12% 576,000
Purchase of TV and film wardrobes 1,500,000 12% 180,000
Promotion expenses for TV and film activities 150,000 12% 18,000
Allocated Rent (P500,000 x  4.8/6.0) 400000 12% 48,000
VAT Payable 330,000

8. Mr. Tax operates two separate lines of business:  Panganan, a VAT-registered restaurant, and
Lambingan Videoke Bar. In the taxable period, the businesses had the follow data, exclusive of
VAT:

Pangana Lambinga
 Total
n n
Cash sales P 550,000 P 300,000  P   850,000
Credit card sales 150,000 200,000  350,000
Sales on
100,000 50,000  150,000
account 
 P1,350,00
P 800,000 P 550,000
0

Payment for operations expenses of Panganan is P600,000, 70% of which is to VAT suppliers.

Required:   Compute for the business taxes payable.

Answer:

VAT PT
Sales P  700,000 P  500,000
Expenses   (600,000 x 70%)     420,000                
Tax Base 280,000 500,000
Tax Rate           12%           18%
Tax Due P  33,600 P  90,000

9. iTranposter Services is engaged in the land transport services of cargoes from Ilocos Norte to
any point in the Philippine. It also has its own ferry boat which transport cargoes and passengers.
During the month, it had the following gross receipts, excluding taxes:

Land transport services:

Ilocos to Manila   P 800,000
Manila to Ilocos 700,000
Ferry boat services: Cargo Passengers
Batangas to Mindoro and vice versa  300,000 400,000
Sorsogon to Samar and vice versa 400,000 500,000
Payment of expenses to VAT sellers:
Services for repairs of transport units  200,000
Purchase of spare parts 300,000
Insurance of transport units 200,000
 Other expenses (70% from VAT
 900,000  
sellers)

Required:
a.  Compute for the business taxes payable if the land transport services are for cargoes.
b. Compute for the business taxes payable if the land transport services are for passengers.

Answers:
a.
Output VAT       
Land transport of cargoes P1,500,000    
   Ferry boat services  1,600,000    
P  12
   Total gross receipts  P 372,000
3,100,000 %
Input VAT    
   VAT expenses  P 700,000    
   Other expenses (P900,000 x 70%)  630,000    
P
   Total VAT payments 12%     159,600
1,330,000
 VAT
       P 212,400
Payable

b.
Output VAT       
   Ferry boat services  1,600,000    
   Total gross receipts P 1,600,000  12%  P 192,000
Input VAT    
   VAT expenses  P 700,000    
   Other expenses (P900,000 x 70%)  630,000    
   Total VAT payments P 1,330,000 12%
  Allocation to VAT Sales  16/31   
  Allocated VAT payments P 686,452  12%        82,374
 VAT
       P 109,626
Payable
 PT Payable  Land transport of passengers P1,500,000  3%  45,000
Accounting and VAT Filing

Reporting, Filing and Payment of Value-Added Taxes

Due Date – on or before

Description Tax Return
the
Monthly Value-Added Tax BIR Form 2550M 20th day following the end
of each month
Quarterly Value-Added Tax
with Summary List of Sales and
Purchases Report
Annual Inventory List
BIR Form 2550Q 25th day following the close
of each taxable quarter
31st day of January of the
the succeeding year

Illustration:
Roldan Trading, VAT-registered, had the following transactions and data for the first quarter of
the year 2000:

January February March

P1,000,00
Sales to private customers P600,000 P1,200,000
0
Sales to government 1,000,000
Purchases from VAT suppliers  400,000 1,400,000 900,000
Purchases from non-VAT suppliers  100,000

Roldan Trading should accomplish and file the following VAT Returns

 January - 2550M on or before February 20

 February - 2550M on or before March 20
 March - 2550Q on or before April 25

The sample journal entries and VAT tax returns are shown on the next pages.
Accounting and VAT Filing

January - Journal Entries and Monthly VAT Return

Roldan Trading, VAT-registered, had the following transactions and data for the first quarter of
the year 2000:

January February March

P1,000,00
Sales to private customers P600,000 P1,200,000
0
Sales to government 1,000,000
Purchases from VAT suppliers  400,000 1,400,000 900,000
Purchases from non-VAT suppliers  100,000

Requirement:  For the month of January,

1. Prepare the journal entries to record the transactions

2. Prepare the Value-Added Tax Return

Journal Entries:
 P400,00
Purchases
0
Input VAT 48,000
Cash P448,000
To record purchases from VAT suppliers
    
Purchases 100,000
Cash 100,000
To record purchases from non-VAT suppliers
    
Accounts Receivale 672,000
Sales 600,000
Output VAT 72,000
To record sales on account to private
customers
Cash 672,000
Accounts Receivable 672,000
To record collection from customers
    
 Output VAT 72,000  
 Input VAT    48,000
VAT Payable    24,000
To record recognition of VAT payable   
    
 VAT Payable  24,000  
 Cash    24,000
To record payment of value-added tax   

Value-Added Tax Return for the month of January:

Accounting and VAT Filing

February - Journal Entries and VAT Return

During the month of February, Roldan Trading purchased goods amounting to P1.4 million,
excluding VAT. He sold half of the goods on account to a private company for P1.12 million
(including VAT), and the other half on account to Barangay Calumpang of General Santos City
also for P1.12 million (including VAT).

January February March

P1,000,00
Sales to private customers P600,000 P1,200,000
0
Sales to government 1,000,000
Purchases from VAT suppliers  400,000 1,400,000 900,000
Purchases from non-VAT suppliers  100,000

Journal Entries:

Purchases P1,400,000
Input VAT 168,000
Cash P1,568,000
To record purchase
    
Accounts Receivable 1,120,000
Sales 1,000,000
Output VAT 120,000
Sales to private customer
Accounts Receivable 1,120,000
Sales 1,000,000
Output VAT 120,000
Sales to government entity
Cash 1,120,000
Accounts Receivable 1,120,000
Collection from private customer
Cash 1,070,000
Final VAT Withheld 50,000  
 Accounts Receivable    1,120,000
 Collection from government
  
entity
    
 Output VAT P240,000  
 Input Tax Expense
14,000
 Input VAT    168,000
 Final VAT Withheld    50,000
VAT Payable    36,000
Recognition of VAT payable   
    
VAT Payable 36,000  
 Cash   36,000
 To record payment of VAT   

Computation of Input Tax Closed to Expense:

The total goods purchased for P1,400,000 has an input VAT of P168,000. As one-half of the
goods were sold to the government, then the input tax related to the sales to the government is
P84,000. 

Input Tax attributable to the sales to the government (P168,000 ÷ 2)     P84,000

Standard Input Tax (P1,000,000 x 7%) 70,000
Input tax closed to expense P14,000

Value-Added Tax Return for the month of February:

A
ccounting and VAT Filing

March - Journal Entries and VAT Return

Roldan Trading, VAT-registered, had the following transactions and data for the first quarter of
the year 2000:

January February March  Total

 P600,00  P1,200,00
Sales to private customers  P1,000,000  P2,800,000
0 0
Sales to government 1,000,000  1,000,000
Purchases from VAT suppliers  400,000 1,400,000 900,000  2,700,000
Purchases from non-VAT suppliers  100,000  100,000

Requirement:  For the month of March,

1. Prepare the journal entries to record the transactions

2. Prepare the Value-Added Tax Return

Journal Entries:

Purchases P900,000
Input VAT 108,000
Cash P1,008,000
To record purchases from VAT suppliers
    
Accounts Receivale 1,344,000
Sales 1,200,000
Output VAT 144,000
To record sales on account to private
customers
Cash 1,344,000
Accounts Receivable 1,344,000
To record collection from customers
    
 Output VAT 144,000  
 Input VAT   108,000
VAT Payable    36,000
To record recognition of VAT payable   
    
 VAT Payable  36,000  
 Cash    36,000
To record payment of value-added tax   
Value-Added Tax Return for March: