Accounting Entry for Purchase with VAT
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3. Altura sold goods on account at a total price of P100,800 to Beltran. Beltran sold the same goods to Cantoria for P123,200 (inclusive of tax) cash. All of them are VAT registered taxpayers. The accounting entry in the books of Cantoria to record the purchase is- A. Cash P 123,200 Sales P 110,000 Output tax 13,200 B. Cash 123,200 Sales 123,200 C. Cash 100,800 Sales 100,800 D. Input tax P 13,200 Purchases 110,000 Cash P 123,200 E. None of the above
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Hi Vanessa, let's solve this accounting problem together. We need to find the correct journal entry for Cantoria's purchase of goods from Beltran.
Identifying the Transaction Type
The problem states that Beltran sold goods to Cantoria for one hundred twenty-three thousand two hundred pesos in cash, and this amount is inclusive of tax.
* Buyer: Cantoria
* Seller: Beltran
* Total Cash Paid: P 123,200 (Tax Inclusive)
Since the buyers and sellers are all VAT registered taxpayers, the purchase price includes a twelve percent Value Added Tax. Let's calculate the base price, also known as the net purchase.
Calculation of Components
Dividing one hundred twenty-three thousand two hundred by one point one two gives us a base purchase amount of one hundred ten thousand pesos.
Now, let's find the Input Tax by subtracting the base price from the total cash paid.
So, the Input VAT is thirteen thousand two hundred pesos. This is a debit for the buyer.
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