2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Accounting for Value Added Tax (VAT)

INTRODUCTION

Value Added Tax (VAT) has been implemented in Thailand since 1992 to replace
Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of
production and distribution. In other words, VAT is a sales tax that is charged to a customer on
the incremental value of goods and services. Current tax rate is 7%. The value added tax must be
submitted to the Revenue Department as shown below.

Figure 1 illustrates VAT system (Unit in baht)

Buy 100 Sell 150 Value added by 50

VAT 7 VAT
Manufacturer 10.50
Pay VAT at 3.50
= 10.50-7

Buy 150 Sell 280

VAT 10.5 Value added by 130
VAT
Retailer 19.60 Pay VAT at 9.10
= 19.6-10.5

Buy 280
End Customer VAT 19.6 Value added by 280
Pay VAT at 19.6

Since businesses have to submit the value added tax to the Revenue Department every
month, the difficulty arises in exactly matching the purchase and sale of the specific product or
service. For instance, a business may purchase goods or service in January but sell them in
March. This results in a time lag between purchase and sales. Also, this makes the calculation of
VAT on goods or services difficult because a business does not know when it can sell the goods
or services. Therefore, VAT is separated into two elements: Input VAT and Output VAT.

Output VAT is a tax collected or collectible by VAT registered person from his
customers when goods are delivered, or services are rendered.
Input VAT is a tax charged by another registered person on any purchase of goods or
provision of services. The term also includes any tax charged on imported goods.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Example 1 ABC company bought an item which costs 100 baht and sold for 400 baht. Tax rate
is 7%.

Purchase Sales
100 baht 400 baht

Value added to the goods = 400 – 100 = 300 baht

Therefore, VAT to be submitted = 300 x 7% = 21 baht

Example 2

Example 1 can be extended as:-

Purchase (Input) Sales (Output)

100 baht 400 baht
Input VAT = 100 x 7% = 7 baht Output VAT = 400 x 7% = 28 baht

VAT to be submitted = Output VAT – Input VAT

= 28 – 7 = 21 baht

Most businesses purchase goods and services that are subject to input VAT and charge
their customers output VAT. Output VAT is offset against input VAT, and the difference is paid
to the Revenue Department if output VAT exceeds input VAT. Conversely, a refund or tax credit
are obtained from the Revenue Department if input VAT exceeds output VAT.

TAXABLE PERSON

The following entities are liable for VAT in Thailand.

1. Any person or entity that regularly supplies goods or provides services in Thailand with
an annual turnover (sales) exceeding 1.8 million baht is subject to VAT in Thailand.
Service is deemed to be provided in Thailand if the service is performed in Thailand
regardless of where it is utilized or if it is performed elsewhere and utilized in Thailand.
2. An importer is subject to VAT in Thailand, regardless of whether they are a registered
person or not. VAT is collected by the Customs Department at the time the goods are
imported.
3. Persons deemed by the law to be traders, e.g. a local agent of an overseas corporation
selling goods or providing services in Thailand.
4. Overseas operators providing e-services to non-Thai VAT registrants, and operators of
platforms assisting in such provision of e-services.

Certain businesses are excluded from VAT and are instead subject to Specific Business
Tax (SBT).

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

VAT REGISTRATION

If the company has an annual turnover exceeding 1.8 million baht or any entities that are
liable for VAT in Thailand, the company must register with the VAT system (Form VAT 01 or
Phor Phor 01) before commencing business or within 30 days after income exceeds the
threshold.
The registration application must be submitted to the Area Revenue Offices if the
business is situated in Bangkok or to the Area Revenue Branch Offices if it is situated elsewhere.
Should taxpayer have several branches, registration application must be submitted to the
Revenue Office where the headquarter is situated.

VAT EXEMPTIONS

The following are certain activities that are exempted from VAT:

1. Small entrepreneur whose annual turnover is less than 1.8 million baht.
2. Sales and import of unprocessed agricultural products, animal products and related goods
such as fertilizers, animal feeds, pesticides, etc.
3. Sales and import of newspapers, magazines, and textbooks and e-books.
4. Certain basic services such as:
• Domestic transportation of all types.
• International transportation by way of land.
• Leasing of immovable property.
• Healthcare services provided by government and private hospitals as well as
clinics.
• Educational services provided by government and private schools and other
recognized educational institutions.
• Professional services such as medical and auditing services, lawyer services in
court and other similar professional services that have laws regulating such
professions.
5. Income from business, commerce, agriculture, industry, transport or any other activity
not specified earlier.
6. Cultural services such as amateur sports, services of libraries, museums, zoos;
7. Services in the nature of employment of labor, research and technical services, as well as
services provided by public entertainers,
8. Goods exempted from import duties under the Industrial Estate law imported into an
Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act.
9. Imported goods that are kept under the supervision of the Customs Department which
will be re-exported and be entitled to a refund for import duties.
10. Imported goods kept under the supervision of the Customs Department, which are
intended for re-export and are eligible for a refund of import duties.
11. Other services such as religious and charitable services, services of government agencies
and local authorities.

DEFINITION

Revenue Code, Section 77/1 provides definitions as follows:

Taxable goods refer to all types of property, tangible or intangible, whether available for
sale, for personal use, or for any other purpose. This also includes any articles imported into
Thailand.
Services refer to any activities performed for the benefit of a person or entity that do not
involve the supply of goods.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

TAX BASE

Tax base of VAT can be characterized as follows:

1. General goods and services

The tax base for VAT is the total value received or receivable from the supply of goods
or services. This value can be in terms of money, property, consideration, service fees, or any
other benefit which is ascertainable in terms of money. Tax base includes any excise tax arising
in connection with such supply. Nevertheless, tax base is exclusive of the value added tax itself
and does not include trade discounts or allowances, but only if trade discounts or allowances are
clearly shown in the tax invoices.

The following example shows how VAT is calculated.

VAT = Price of goods or service before VAT (net of trade discounts) x VAT rate

Example 3 XYZ Company, a VAT registrant, sold goods for 100,000 baht (before VAT) with a
5% trade discount.
VAT Calculation
Tax base (Selling price net of trade discount) = 100,000 x (100% – 5%) = 95,000
Thus, Output VAT is equal to 95,000 x 7% = 6,650 baht.

2. Imported goods
Tax base = C.I.F. price + Import duty + Excise Tax (if any) + other taxes and fees
(if any)

3. Exported goods
Tax base = F.O.B. price + Excise Tax (if any) + other taxes and fees (if any)

VAT RATES

Under VAT system, there are two types of tax rate.

1. General rate
Currently, the rate is 7 percent for sales of goods, provision of services or import.1 This
rate is applied for both output and input VAT.

2. Zero percent rate

Certain activities are liable to VAT at the rate of zero percent. These activities are as
follows:

§ Export of goods;
§ Services provided in Thailand but used, either partly or wholly, in a foreign country
in accordance with rule, procedure and condition prescribed by the Director-General;
§ Aircraft or sea-vessels engaging in international transportation;
§ Supply of goods and services to government agencies or state-owned enterprises
under foreign-aid program;
§ Supply of goods and services to the United Nations (UN) and its agencies as well as
embassies, consulate-general and consulates;

1
The standard rate of VAT is 10%, but the rate is currently reduced to 7% until 30 September 2024
(unless further extended by the government).
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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

§ Supply of goods and services between bonded warehouses or between enterprises

located in Export Processing Zones (EPZs).

This zero percent rate is used only for output VAT, but input VAT remains the same rate,
which is 7% reimbursable.

TIME OF SUPPLY

The time of supply of goods or services, or the chargeable event, is important because it
determines when a registered person must account for VAT. The time of supply (tax point) is as
follows:

Business transactions Tax point where VAT is normally charged

1. Sales of goods The earliest of :

• the time of delivery; except
o when ownership of goods is transferred; or
o a payment is made; or
o a tax invoice is issued.
2. Provision of services The earliest of :
• the time a service fee is receipt; except
o tax invoice is issued; or
o service is utilized by owner.

3. Import or export of The earliest of :

goods • the time import (export) duty is paid; or
• a guarantee is put up; or
• a guarantor is arranged for; or
• a bill of lading is issued.
4. Leases/Installments The earliest of :
• the time each payment is due; or
• a payment is made; or
• a tax invoice is issued.

TAX INVOICE

VAT registered person or entity is required to issue tax invoices every time the
transactions are made. The tax invoice shows the details of the nature and value of goods sold or
services provided, as well as the amount of VAT due. Tax invoice is used as evidence for
claiming tax refund or tax credit.
Tax invoice must contain at least the following elements:
1. The word "Tax invoice" in a prominent place,
2. Name, address and tax identification number of the issuer,
3. Name and address and tax identification (starting from January 2015) of the purchaser or
customers,
4. Serial numbers of tax invoice and tax invoice books (if applicable),
5. Description, value and quantity of goods or services;
6. Amount of VAT chargeable on goods or services, and
7. Date of issuance
8. The mention “Head office” or “Branch number” for both seller and purchaser.
9. Other information as indicated by Director General.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Example of tax invoice

Source https://thailand.acclime.com/wp-content/uploads/Sample-Receipt-Tax-Invoice.pdf
Remark: Incomplete tax invoice or an abbreviated tax invoice (ABB) cannot be used for tax
refund or tax credit.

Documents and records

Tax invoices received, and copies of tax invoices issued, must be maintained along with
relevant documents and records. For example, bookkeeping records and inventories of goods and
raw materials must be properly kept at the place of business by VAT operators.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

JOURNALIZING VAT TRANSACTIONS

The following examples illustrate VAT transactions for merchandising and service operations.

Merchandising operations

4.1 Purchase of inventory (VAT accountability incurs upon the delivery of product.)

Example 4.1 TT Company operates in a merchandising business. The company is a VAT

registrant and uses periodic inventory system. The price of purchase and sales are VAT included.

The following are business transactions in June, 20X1.

June 1 Purchased inventory amounting to 1,177 baht (VAT included) from Central
Department Store, with credit term of 2/10, n/30.
June 3 Returned inventory amounting to 107 baht (VAT included) due to damage.
June 10 Paid the remaining amount in full to Central Department Store.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Jun 1 Purchases 1,100 -
Input VAT 77 -
Accounts payable 1,177 -
Purchased inventory.
Jun 3 Accounts payable 107 -
Purchase returns and allowances 100 -
Input VAT 7 -
Returned inventory
10 Accounts payable 1,070 -
Cash 1,050 -
Purchase discounts (1,000 x 2%) 20 -
Paid the amount in full.

Remark:
§ For purchase and sales of goods, VAT accountability incurs upon the delivery of product.
§ Upon payment to the supplier, the 2% cash discount is calculated based on the amount
excluding VAT, net of purchase returns and allowances.

4.2 Sales of inventory (VAT accountability incurs upon the delivery of product.)

Example 4.2 The following are sales transactions for TT company in June using periodic
inventory system.
June 13 Sold inventory amounting to 2,140 baht (VAT included) to Betty Store, with
credit term 2/10, n/30.
June 15 Received an item of inventory returned from Betty Store amounting to 107 baht
(VAT included) due to damage.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

June 20 Received the remaining amount in full from Betty Store.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Jun 13 Accounts receivable 2,140 -
Sales 2,000 -
Output VAT 140 -
Sold inventory.
15 Sales returns and allowances 100 -
Output VAT 7 -
Accounts receivable 107 -
Received inventory returned
20 Cash 1,995 -
Sales discounts (1,900 x 2%) 38 -
Accounts receivable 2,033 -
Received cash from Betty Store.

Service Operations

5.1 Receiving service from another company (VAT accountability is incurred upon
payment.)

Example 5.1 SS Company, a VAT registrant, operates in a service business. All prices are VAT
included. The following are business transactions in July, 20X1.

July 28 Received an invoice from Company B for maintenance expenses amounting to

3,210 baht (including VAT).
July 31 Paid for maintenance expense in full amount.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Jul 28 Maintenance expense 3,000 -
Suspended input VAT 210 -
Accrued maintenance expense 3,210 -
Received invoice for maintenance expense
31 Accrued maintenance expense 3,210 -
Cash 3,210 -
Paid for accrued maintenance expense

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Account Titles Ref Debit Credit

Input VAT 210 -
Suspended
¤ input VAT 210 -
Transferred suspended input VAT to input
VAT

5.2 Providing services to customers (VAT Accountability is incurred upon receiving cash.)

Example 5.2 The following are transactions of SS Company.

July 28 Provided service on account amounting to 1,070 baht (including VAT).
August 2 Received 1,070 baht (including VAT) for services provided on July 28.
General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Jul 28 Accounts receivable 1,070 -
Service revenue 1,000 -
Suspended output VAT 70 -
Provided service on account.
Aug 2 Cash 1,070 -
Accounts receivable 1,070 -
Received cash for service provided.
Suspended output VAT 70 -
Output
¤ VAT 70 -
Transferred suspended output VAT to output
VAT

August 5 Performed service and received cash amounting to 4,280 baht (including VAT).

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Aug 5 Cash 4,280 -
Service revenue 4,000 -
Output VAT 280 -
Received cash for service provided.

Since the company received cash when providing the service on August 5, it can record
output VAT at the same time.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

UNCLAIMED INPUT VAT

The following are some examples of unclaimed input VAT (Revenue Code, Section
82/5):
1. Input VAT of incomplete tax invoice or an abbreviated tax invoice
2. Input VAT incurred when a firm buys passenger cars (sedan cars) seating up to 10
persons.
3. Input VAT incurred when a firm pays for any reception or dinner for its customers
(Entertainment expenses).
4. Input VAT arising from types of business activity which are not subject to VAT.
5. Input VAT under a tax invoice issued by a person not authorized to do so.

This UNCLAIMED INPUT VAT is NOT creditable but can instead be used as a
deductible expense under Corporate Income Tax (CIT).
In those cases, the unclaimed input VAT is recorded as follows:
1. Unclaimed input VAT arising from certain expenses is recorded separately as a separate
expense account. For example, unclaimed input VAT may result from entertainment
expenses.
2. Unclaimed input VAT arising from the purchase of a certain asset is included in the
asset's recorded value. For example, unclaimed input VAT may occur when a firm
purchases a passenger car (sedan car) seating up to 10 persons."
6.1 The unclaimed VAT recorded separately as an expense account

Example 6.1: On August 15, YY Company paid for a customer’s reception expense amounting
to 2,140 baht (including VAT). (Note: Input VAT from entertainment expense is unclaimed.)
General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Aug 15 Entertaining expense 2,000 -
Unclaimed input VAT (Expense) 140 -
Cash 2,140 -
Paid for entertaining expense.

6.2 The unclaimed VAT recorded by including in the asset's recorded value
Example 6.2: On August 20, YY Company paid 642,000 baht (including VAT) for a sedan car
(seating fewer than 10 passengers). (Note: Input VAT from the purchase of a sedan car is not
claimable.)
General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Aug 20 Vehicle 642,000 -
Cash 642,000 -
Purchased a sedan car.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Purchase of other assets

The input VAT from the purchase of other assets such as property, plant and equipment
can be refunded by the Revenue Department. Thus, it is recorded in the input VAT account.

Example 7: On August 21, YY Company purchased equipment for 5,350 baht (including VAT)
on credit.
General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Jun 21 Equipment 5,000 -
Input VAT 350 -
Accounts payable 5,350 -
Purchased equipment on credit.

To summarize, VAT is calculated at each stage of the production or distribution process,

based on the added value of goods or services. Here's a step-by-step breakdown of how VAT is
typically calculated:

1. Output VAT
• This is the VAT that businesses charge on the goods and services they sell.
• Formula: Output VAT=Sales Price×VAT Rate
• For example, if a business sells a product for 100 baht and the VAT rate is 7%, the
Output VAT is:100×0.07 = 7
• The customer pays 107 baht, which includes 100 baht for the product and 7 baht VAT.
2. Input VAT
1. This is the VAT that businesses pay on their purchases (raw materials, services, or
products used in their operations).
2. If a business buys raw materials worth 50 baht with a 7% VAT rate, the Input VAT is:
50×0.07 = 3.5

Zero-Rated and Exempt Goods:

• Zero-rated goods: VAT is charged at 0%, but businesses can still reclaim Input VAT.
• Exempt goods: No VAT is charged, and businesses cannot reclaim Input VAT on
expenses related to these goods.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

CLOSING INPUT AND OUTPUT VAT AT THE END OF MONTH

The VAT taxable period is a calendar month. At the end of each month, the business
summarizes the amount of Output VAT and Input VAT. Since Output VAT and Input VAT are
temporary accounts, they are closed at the end of each month for VAT submission or refund.

To calculate the VAT that the business must pay to the tax authorities or claim as a
refund, Input VAT is subtracted from Output VAT.

VAT Payable (or VAT receivable) = Output VAT−Input VAT

1. If Output VAT exceeds Input VAT, the business owes the difference to the tax authority.
the difference amount is shown as VAT payable and paid to the Revenue Department.

2. If Input VAT exceeds Output VAT, the difference amount will be shown as VAT
receivable. The business can claim a refund or carry forward the excess to offset future
VAT liabilities in the following month.

Example 8: VAT Calculation

• Sales 100 baht with 7% Output VAT 7: Output VAT is: 100×0.07 = 7
• Purchases 50 baht with 7% Input VAT: Input VAT is: 50×0.07 = 3.5
• VAT Payable:7−3.5=3.5 (VAT payable to tax authority)

In Thailand, the VAT return form (referred to as Form VAT 30 or Phor Phor 30) is used
to summarize the Input and Output VAT amounts. The business must file the VAT return form
and pay the VAT payable to the Revenue Department on a monthly basis, within the 15th of the
following month.

If taxpayer has more than one place of business, each place of business must file the
return and make a payment separately unless there is an approval from the Director-General of
the Revenue Department. In the case where supply of goods or services is also subject to Excise
tax, VAT return and tax payment, if any, must be submitted to the Excise Department together
with Excise tax return and tax payment within the 15th of the following month.

Services utilized in Thailand and supplied by service providers in other countries are also
subject to VAT in Thailand. In such cases, the service recipient in Thailand is obliged to file a
VAT return (Form VAT 36 or Phor Phor 36) for the imported services and pay any applicable
tax on behalf of the service providers. The Phor Phor 36 must be filed within the 7th day of the
month following the month in which the fee is remitted. In the case of imported goods, the VAT
return and tax payment must be submitted to the Customs Department at the point of import.

TAX REFUND

Each month, if input VAT exceeds output VAT, taxpayers can choose to claim their
refund in one of two forms: (1) cash, or (2) a tax credit to be used in the following month(s).
Unused input VAT may be credited against output VAT within the next six months. However,
the refund can only be claimed within three years from the filing deadline. Moreover, in the case
of a zero-percent rate, the taxpayer is always entitled to a VAT refund.
Certain input VAT, such as VAT related to entertainment expenses, is not creditable
under VAT. However, these non-creditable input taxes (unclaimed VAT) can be used as
deductible expenses for Corporate Income Tax (CIT) purposes instead.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

The following examples illustrate the closing of input and output VAT the end of month.

Example 9: Output VAT exceeds input VAT at the end of month

On March 31, 20X1, BB Company had a normal balance of 21,000 baht in output VAT and
14,000 baht in input VAT. Journalize the closing entry of input VAT and output VAT at the
month end.
General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Mar 31 Output VAT 21,000 -
Input VAT 14,000 -
VAT payable or VAT* 7,000 -
To close input and output VAT.

*Alternatively, a company may use VAT account.

On April 15, BB Company filed its VAT return and paid the required VAT amount.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Apr 15 VAT payable or VAT* 7,000 -
Cash 7,000 -
To submit VAT.

Example 10: Input VAT exceeds output VAT at the end of month

On March 31, 20X1, DD Company had the normal balance of 4,200 baht in output VAT and
6,300 baht in input VAT. Journalize the closing entry of input VAT and output VAT at the
month end.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Mar 31 Output VAT 4,200 -
VAT receivable or VAT* 2,100 -
Input VAT 6,300 -
To close input and output VAT.

*Alternatively, a company may use VAT account.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

At the 15th of the following month, a company will file the VAT return to the Revenue
Department. A company can claim for VAT refund in a form of either (1) cash or (2) tax credit
to be used in the following month(s).

1. Cash refund
On April 15, DD Company filed the VAT return and received a cash refund amounting to
2,100 baht.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Apr 15 Cash 2,100 -
VAT receivable or VAT* 2,100 -
To receive cash refund.

On April 30, DD Company has a balance of 21,000 baht in output VAT and 14,000 baht
in input VAT for the month of April. Journalize the closing entry of input VAT and output VAT.

General Journal p. 1
Date Account Titles Ref Debit Credit

30 Output VAT 21,000 -

Input VAT 14,000 -
VAT payable 7,000 -
To close input and output VAT.

2. Tax credit to be used in the following month

On April 15, if DD Company chooses to receive a tax credit, the company files the VAT
return. No journal entry is required.

Date Account Titles Ref Debit Credit

20X1
Apr 15 No entry

On April 30, DD Company has a balance of 21,000 baht in output VAT and 14,000 baht
in input VAT for the month of April. Journalize the closing entry of input VAT and output VAT.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Apr 15 No journal entry

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Account Titles Ref Debit Credit

30 Output VAT 21,000 -
Input VAT 14,000 -
VAT receivable 2,100
VAT payable 4,900 -
To close input and output VAT.

Note: To close the input VAT and output VAT for April, DD Company can use the VAT
receivable from March amounting to 2,100 baht to offset the VAT submission (as a tax credit) in
April.

On May 15, DD Company filed the VAT return and paid the required VAT amount.

General Journal p. 1
Date Account Titles Ref Debit Credit
20X1
Apr 15 VAT payable 4,900 -
Cash 4,900 -
To submit VAT.

SPECIFIC CASE OF VAT

If the company distributes its products for advertising purposes, output VAT is calculated
based on the selling price (Note: Output VAT incurs when the product is sold or transferred).

Example 11
Tammy Corporation delivered products (at a cost of 1,000 baht) to a game show on a TV
channel. The selling price of these products is 2,000 baht. Assuming that the company used
perpetual inventory system. AT 2000 x
700
=
140 =

Dr. Advertising expenses 1,140

Cr. Inventory 1,000
Output VAT (7% of 2,000) 140

SUMMARY Telling
Value-Added Tax (VAT) is a consumption tax levied on the value added to goods and
services at each stage of production or distribution. Effective VAT accounting is crucial for
businesses to ensure compliance with tax regulations and accurate financial reporting. Here are
key components of VAT accounting:
1. VAT Registration: Businesses whose taxable turnover exceeds a specified threshold
must register for VAT. This allows them to collect VAT on sales and claim VAT on
purchases.
2. Output VAT and Input VAT:
o Output VAT: The VAT collected from customers on sales of goods and services.
o Input VAT: The VAT paid on purchases of goods and services that can be
claimed back from the tax authorities.

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

3. VAT Returns: Businesses are required to file periodic VAT returns, detailing the output
VAT collected and input VAT paid. The difference between these amounts determines
the VAT payable or refundable.
4. Tax Invoices: Proper documentation is essential. Tax invoices must be issued for sales,
showing the VAT charged. Similarly, businesses must maintain records of tax invoices
received for input VAT claims.
5. Closing Entries: At the end of a reporting period, businesses need to close their VAT
accounts. This involves offsetting input VAT against output VAT and recording any
VAT payable or receivable.
6. VAT Filing: On the 15th of the following month, businesses file their VAT returns and
pay the VAT amount to the Revenue Department or receive a cash refund and tax credit
from the Revenue Department.

Remark: Be careful for time of supply, VAT exemptions and unclaimed input VAT.

**************

REFERENCES

Thai
§ Natchanont Komutputhipong and Thanyaluk Vichitsarawong (2022), Principles of
Accounting, 4th Edition. Chulalongkorn University Press: Bangkok.
§ Orapin, Duangsamorn et al (2005) Financial Accounting. 4th Edition. Chulalongkorn
University Press: Bangkok, pp.185-208.

English
§ Lecture Note, Nopmanee Tepalagul, Kriengkrai Boonlert-U-Thai, Natchanont
Komutputipong, & Thanyaluk Vichitsarawong
§ Thomas, Andrew (2006) Introduction to Financial Accounting. 5th International Edition.
McGrawHill: UK, pp.264-265.
§ https://www.rd.go.th/english/6043.html (Access on September 13, 2022)

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2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Example: Perpetual Inventory System with VAT

Tony Company is a shoe seller registered in the VAT system and uses a perpetual
inventory system to record all inventory transactions. Assuming the company uses FIFO
inventory system and the beginning balance of inventory is zero.

Ramark: The shoe prices listed below do not include VAT. The selling price is 700 baht each.

The following are business transactions in June.

June 2 Purchased a sedan car for 856,000 baht (including VAT). The company paid 500,000
baht in cash and issued a six-month note for 356,000 baht
June 3 Purchased furniture from Living Mall for 160,500 baht (including VAT) on account.
June 4 Purchased 110 pairs of shoes at a cost of 506 baht each from Thai Factory, with credit
terms of 2/10, n/30. Mo
June 5 Paid 600 baht in cash for freight-in expenses related to the purchase on June 4.
June 6 Returned 10 pairs of shoes to Thai Factory due to defects
June 9 Sold 75 pairs of shoes to Patty Company at a selling price of 700 baht each (excluding
VAT), with credit terms of 3/10, n/30, F.O.B. shipping point
June 10 Paid 800 baht for transportation costs on behalf of Patty Company. (Domestic
transportation is exempt from VAT.)
June 11 Received a return of 5 pairs of shoes from Patty Company due to the wrong size.
June 15 Paid cash in full for the shoes purchased on June 4.
June 16 Paid 1,070 baht (including VAT) for dinner for entertainment expenses.
June 18 Received cash in full from Patty Company.
June 20 Delivered 20 pairs of shoes, costing of 506 baht each to a TV show for advertising at no
charge.
June 25 Paid 20,000 baht for June rent (VAT Exemption).
June 29 Received a utility bill for June amounting to 3,210 baht (including VAT), which is due
on July 7.
June 30 Closed the input VAT and output VAT accounts at the end of the month.

Instruction:
1. Journalize the above transactions
2. Post input VAT and output VAT to the general ledger in the form of T-accounts
3. Post inventory and cost of goods sold to the general ledger in the form of T-accounts

17 / 26
2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

1. General Journal Page 1

20X1 vehicle
Jun 2 856 000 -
cash ,

500000 -
note payable 356 , 000 -
Purchased a sedan car
150000
3 furniture -
rat
input 10, 908
-
160 , 500
acct payable -
Purchased an office furniture
4 Inventory (110 shoes @ 500 each) 55,000 -
Input VAT 3,850 -
Accounts payable 58,850 -
Purchased 110 shoes on account
5 Inventory 600 -
Cash 600 -
Paid 600 baht for freight-in
6 AIP 5350 -

Inventory (10x500) 5000 -

350 -
input VAT
Returned 10 shoes due to defect
9 Accounts receivable 56,175 -
Sales (75 shoes @ 700 each) 52,500 -

S
Output-VAT 3,675 -
Sold 75 shoes on account.
-
COGSSYS 37950
37938 -
Recorded costs of goods sold

net balance of inventory =

55 ,
000 + 600 -

5000
= 50
,
600

price per
unit sooo
: 500 /unit
Too shoes
18 / 26
2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

General Journal Page 2

20X1
June 10 Accounts receivable 800 -
Cash 800 -
Paid cash for freight expense on behalf of Patty Co.
11 Sales returns and allowance (5 shoes @ 700) 3,500 -
* Output VAT 245 -
Accounts receivable 3,745 -
Received a return of 5 shoes from Patty Co.
Inventory (5 shoes @ 506) 2,530 -
Cost of goods sold 2,530 -
Recorded cost of inventory returned.
15 Alp ·
reso-seso 53500 -
cash 53500 -
Paid cash in full for inventory purchased on Jun 4.
16 Entertainment exp 1006 -
unclaimed at 70 -
cash 1070 -
Paid for entertaining expense
18 Cash 51,760 -
Sales discount (52,500-3,500) x 3% 1,470 -
Accounts receivable (56,175 + 800 – 3,745) 53,230 -
Received cash payment from Patty Co.
20 Advertising exp 11 100
,
-
-
Inventory 10120

output rat To +100 + 28 988

-
Delivered 20 shoes to a TV show.

19 / 26
2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

General Journal Page 3

25X1
June 25 Rent expense 20,000 -
Cash 20,000 -
Paid cash for a June rent.
29
utility exp 3000 -

suspended input rat 210

3210 -
Alp ,
utility payable
Recorded utility expense.
VAt
30
Output 4418 -
-
VAT ReC 9598
Input VAT
Summarized VAT amount for the month.
14000 -

2)
Input-VAT Output-VAT
3 10,500 6 350 11 245 9 3,675
4 3,850 418 20 980
4,
14 000
-

(Bal. 14,000) 9 590 (Bal. 4,410)

3)
Inventory Cost of goods sold
Beg. 0 9 37,950 12 2,530
4 55,000 6 5,000 (Bal. 35,420)
5 600 9 37,950
11 2,530
20 10,120
(Bal. 5,060)

20 / 26
2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Practice Exercise - VAT

HW
Q1 Tina Service Company provides repair services to customers. The company is a VAT registrant
and has a policy to receive tax credit in the following month if input VAT exceeds output VAT.

As of August 31, 20X6, the VAT payable account had credit balance of 16,500 baht.
During September 20X6, the company had the following business transactions.

Sep 2 Provided repair service to a customer and received cash in the amount of 32,100 baht
(including VAT).
6 Purchased spare parts on account for 40,000 baht (excluding VAT), with credit terms of
1/10, n/30 from Anna Company. [Hint: Record in the spare parts account.]
10 Provided repair service to a customer on account for 5,885 baht (including VAT). The
customer will pay on September 20.
12 Paid utilities expense in the amount of 6,955 baht (including VAT).
15 Paid wages to employees in the amount of 55,000 baht.
15 Submitted VAT return (Form VAT30) for August to the Revenue Department.
16 Paid for spare parts purchased on September 6. The discount received is deducted directly
from the asset cost.
18 A customer had his car repaired. The service charged was 10,400 baht
(excluding VAT). A trade discount of 400 baht was given to a customer.
20 Received payment for the service rendered on September 10.
23 Purchased spare parts on account for 85,600 baht (including VAT).
26 Received an invoice for 3,210 baht (including VAT) for the maintenance expense, which
has not yet been paid.
30 Paid the invoice received on September 26.
Closed input VAT and output VAT accounts for the month of September.

Instruction
1) Journalized the above transactions in the answer sheet.
2) Posted transactions to the T-account of in input VAT and output VAT.
3) Answer the following questions:
• Balance of suspended input VAT ______
• Balance of suspended output VAT ______

21 / 26
 2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Accounts Title and Explanation Account Debit Credit

No.

22 / 26
 2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Accounts Title and Explanation Account Debit Credit

No.

Input VAT Output VAT

Balance of suspended input VAT = ___________

Balance of suspended output VAT = ___________

23 / 26
2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

HOMEWORK – VAT (1)

Q2 Teddy Corporation started its business to sell rolls of cloth and registered in the value added
tax system on January 1, 20X7. The company uses periodic inventory system. It has a policy to
receive tax credit in the following month if input VAT exceeds output VAT.

During January 20X7, the company had the following business transactions.

Jan 1 Bought 310 rolls of cloth on account from the AA factory at 300 baht each (VAT
excluded), credit term 1/10, n/30.
2 Bought showcases furniture for 9,630 baht in cash (VAT included).
3 Returned 10 rolls of cloth to the AA factory due to incorrect delivery.
5 Sold 150 rolls of cloth to Florian, Inc. at 700 baht each (VAT excluded), with credit
term 1/10, n/30.
7 Bought 200 rolls of cloth on account from Cotton Co. at 300 baht each (VAT excluded),
with credit term 1/10, n/30.
9 Received payment in full from Florian, Inc.
10 Paid for the inventory purchased on January 1.
14 Sold 220 rolls of cloth to Jenny Corporation at 800 baht (VAT excluded), with credit
term 1/10, n/30.
15 Purchased a 4-seat sedan for 963,000 baht (VAT included) in cash.
16 Sold 100 rolls of cloth to Shane Corporation at 800 baht each (VAT excluded). Because
the customer paid immediately, the company gave 5% trade discount.
17 Paid Cotton Co. for the cloth purchased on January 7.
18 Received an invoice for warehouse cleaning service in the amount of 6,634 baht (VAT
included).
22 Received a return of 20 rolls of cloth from Jenny Corporation due to incorrect delivery.
24 Received payment in full from Jenny Corporation.
25 Paid for warehouse cleaning services for which an invoice was received on January 18.
28 Bought 300 rolls of cloth on account from the factory at 400 baht each (VAT excluded),
with credit term1/10, n/30.
31 Closed input VAT and output VAT accounts for the month.

Instruction

Journalize the above transactions.

1) Journalized the above transactions in the answer sheet.
2) Posted transactions to the T-account of input VAT and output VAT.
3) Fill in the blank with the answer.
• Balance of suspended input VAT ______
• Balance of suspended output VAT ______ 8

24 / 26
 2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Accounts Title and Explanation Account Debit Credit

No.
20X7

Jan 1 purchase 93 000 ,

-

in put
Vat
6,518-

AIP (AA factory) 99 , 510 -

e furniture 9 000 -
,

input Vat 600 -

9630-
cash
&
3
Alp 3210 -

and allowance
purchase return 3 000-
,

VAT
&
input 210-

S AIR (florian Inc ,

112, 358 -

sale revenue 105 000

,

output LAT 7 350

,
-

↑ Purchase 60000 -

input . VAT 4200-

Alp (Cotton Co ) .
64900-

9 Cash 111 , 300 -

sale discount
1050
AIR (Florian , Inc 112 , 350 -

10 AlP(AA factory 99s18

Purchase discount 930-

cash 98 ,500
-

18832
14 AIR (Jenny
Co.)
o

12320
VAT output 25 / 26
sale revenue 176008
 2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Accounts Title and Explanation Account Debit Credit

No.

15 Vehicles 963 000

,
-

963000
cash ,

16 Cash (shane co 81 , 320 L

-

sale revenue (000 + 100) 5 %

-
76000
I
-

Output VAT 5
,
328

17
Alp (cotton co) 64 200 ,
-

13 558-
cash ,

purchase discount
642-

18 service expense 6200

-

suspended input
434
VAT -

Alp 6634-

22 Sale return and allowance (000 20) +

16 , 000

Output VAT 1120

I

A/R 17 100
Denny ,

24 cash 169 600

,

sale discount (176 , 000 1000)

- +0 01.

16600
AIR 171, 200

es Alp 6200
suspended input VAT 494

cash 6654

25 / 26
 2601121 Principles of Accounting Associate Prof. Thanyaluk Vichitsarawong, Ph.d.

Date Accounts Title and Explanation Account Debit Credit

No.
28 Purchase (200 + 300) 120 , 000

8 , 400
Input VAT

Alp 128 , 400

31
Output VAT 23, 870

VAT payable 3 90
,

19 964
Input rat ,

Input VAT Output VAT

1 6 5103 21022 1 120 5 7 350
,

,
,

2 14 1 2328
630 ↓

T , 200
4 16 5 320
,

18 434
Bal 23, 820)
28 , 400
8 .

Gal .
19 , 964)
26 / 26