VAT · Level: Exam
Journal entry: Paying the VAT balance
At the end of the period input VAT is offset against output VAT, and the balance is paid to HMRC.
Worked example
At the end of the VAT period, Output VAT shows £2,334.37 and Input VAT £1,710.14. Offset the input VAT and pay the balance to HMRC (one entry).
Correct journal entry
Output VAT £2,334.37 / Input VAT £1,710.14, Bank £624.23
Debit
Output VAT£2,334.37
Credit
Input VAT£1,710.14
Bank£624.23
Why?
- Output VAT: liability decreases → debit
- Input VAT: asset decreases → credit
- Bank: asset decreases → credit
Calculation
- VAT payable: £2,334.37 − £1,710.14 = £624.23
Typical mistake
Paying the full output VAT without deducting input VAT.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
At the end of the VAT period, Output VAT shows £2,284.18 and Input VAT £541.40. Offset the input VAT and pay the balance to HMRC (one entry).
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for paying the vat balance?
Example: Output VAT £2,334.37 / Input VAT £1,710.14, Bank £624.23.
How do I recognise this case?
At the end of the period input VAT is offset against output VAT, and the balance is paid to HMRC.
What is the typical mistake?
Paying the full output VAT without deducting input VAT.