ICANFinancial AccountingDouble Entry and Books of Prime Entry2025

Zenith Trading Limited purchased goods on credit from Supplier X for ₦1,200,000 plus 7.5% Value Added Tax (VAT) as required under the VAT Act Cap V1 LFN 2004 (as amended). What is the correct double entry to record this transaction in the books of Zenith Trading Limited, assuming VAT is recoverable?

ADr Purchases ₦1,290,000; Cr Accounts Payable ₦1,290,000
BDr Purchases ₦1,200,000, Dr VAT Control ₦90,000; Cr Accounts Payable ₦1,290,000CORRECT
CDr Purchases ₦1,200,000; Cr Accounts Payable ₦1,200,000; Dr VAT Expense ₦90,000; Cr Cash ₦90,000
DDr Accounts Payable ₦1,290,000; Cr Purchases ₦1,200,000; Cr VAT Control ₦90,000
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Why the answer is B, and why the others tempt you.
VAT of ₦1,200,000 × 7.5% = ₦90,000. Total payable = ₦1,290,000. Since VAT is recoverable (input VAT), it is debited to a VAT Control account rather than included in the cost of purchases. The credit goes to Accounts Payable for the full ₦1,290,000 owed to the supplier. Option D reverses the normal debit/credit convention for payables.
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