Answer to Question #234802 in Accounting for Maps

Question

On 4 December 2020, SA Attorneys did a debit card payment of R11 500 to SA Insurers, for the monthly short-term insurance expense. SA Attorneys and SA Insurers are a registered VAT vendors.

Which account(s) will be debited, and which account(s) will be credited in the general ledger of SA Attorneys?

Answer 1

Solution:

The accounts to be debited will be Insurance Expense A/c and Input VAT A/c, while the account to be credited is the Bank A/c.

Total insurance premium inclusive of VAT = 11,500

Gross Insurance premium = $\frac{11,500}{1.15} = 10,000$

Input VAT 15$\%$ = (15$\% \times$10,000) = 1,500

 

Journal entries:

Dr. Insurance Expense A/c                  10,000

Dr. Input VAT A/c                                 1,500

                     Cr. Bank A/c                                                11,500

(To record monthly insurance expense paid through a debit card)