Question

Gerrard Ltd is registered for VAT. In the month of April, it sells goods to customers for a total of £89,436 excluding VAT and purchases goods from suppliers for a total of £86,790 including VAT.

What is the net amount shown in Gerrard Ltd's VAT account at the end of April?
A £3,422 debit
B £2,452 debit
C £3,422 credit
D £2,452 credit

Answer 1

The net amount shown in Gerrard Ltd's VAT account at the end of April is £2,452 debit.

Step-by-step explanation:

To determine the net amount shown in Gerrard Ltd's VAT account at the end of April, we need to calculate the VAT payable and receivable.

VAT payable is calculated by finding 20% of the sales amount. In this case, 20% of £89,436 is £17,887.20.

VAT receivable is calculated by finding 20% of the purchase amount. In this case, 20% of £86,790 is £17,358. Therefore, the net amount shown in Gerrard Ltd's VAT account at the end of April is the difference between the VAT receivable and payable, which is £17,358 - £17,887.20 = £529.20.

Therefore, the correct answer is option B: £2,452 debit.

To calculate the net amount in Gerrard Ltd's VAT account, we need to consider both the output VAT (VAT on sales) and input VAT (VAT on purchases).