When you have a sales return where does the VAT go and why?

I have just started a bookeeping course and I am really stuck.
You have a debit and credit column in your vat account but where do you put the vat from purchase/sales returns?

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One Response to “When you have a sales return where does the VAT go and why?”

  1. Mark B says:

    A debit to the VAT account would normally be an input tax entry following the purchase of an item. If you debit the VAT account you reduce the liability due to HMRC.

    On the flip side a credit entry to the VAT account would be an output tax entry following a sale. By crediting the VAT account you are increasing the VAT account and your liability to HMRC.

    If you have a purchase credit this would create a credit entry to the VAT account because your VAT liability would be increased. You are effectively reducing your input tax claim.

    A sales credit would reduce your VAT liability and therefore be entered as a debit to the VAT account. You are effectively reducing your output tax liability.

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