According to the Ministry of Finance's interpretation of the issues related to the application of the Provisions on Accounting for Value-added Tax (VAT) in the Announcement on Relevant Policies for Deepening Value-added Tax (VAT) Reform, "When a taxpayer in the production or living service industry acquires assets or receives labor services, he/she should handle the VAT-related business in accordance with the relevant provisions of the Provisions on Accounting for Value-added Tax (VAT).

When the VAT is actually paid, the taxable amount should be debited to "Taxes Payable - Unpaid VAT", etc., the actual amount of tax should be credited to "Bank Deposits", and the amount of credit should be credited to "Other Income"."

Therefore, the accounting entries of VAT credit

Borrow: Taxes payable - unpaid VAT

Credit: Bank deposits

Other gains

Actual payment of VAT, distinguish the following cases of credit

1. Before the credit is equal to the zero amount of tax payable, the amount of the current period of the credit can be offset all of the credit to be carried forward to the next period. The taxable amount before offset is greater than zero, and greater than the current period can be offset plus credit, the current period can be offset plus credit from the full amount of the taxable amount before offset;

By the taxable amount debited to the "Taxes Payable - Unpaid Value Added Tax" and other accounts, according to the actual amount of tax credited to the "Bank Deposits" account, according to the current period can be offset plus credit, and the current period can be credited to the "Bank Deposits" account. The full amount of deductible credits is credited to the "other income" account.

3. If the taxable amount before offset is greater than zero, and less than or equal to the current creditable addition, the current creditable addition will be offset against the taxable amount to zero. The uncredited credit of the current period can be carried forward to the next period to continue to offset.

Debit "Taxes Payable - Unpaid VAT" and credit "Other Income" according to the amount of credit.

What is the month-end processing of the credit?

Accounting for deductions of inputs, which are credits to the taxable amount, need to be divided into two parts according to the policy, which are listed in Schedule IV of the "Announcement on Adjustment of Matters Relating to Value-added Tax Returns" of the State Administration of Taxation (SAT) Announcement No. 15 of 2019, annexed to the declaration form.

Accounting treatment also needs to be divided into two parts, and it is suggested to set up two additional line items of "Taxes Payable - VAT Payable - Inputs Plus Deductions" and "Taxes Payable - VAT Payable - Inputs Plus Deductions to be Offset" for the accounting of the 10% inputs plus deductions, and it is suggested to make the following entries.

1, the calculation of the current period of deductible inputs and credits

(1) occurring in the current period based on the deductible inputs and credits can be added

Borrow: Fixed Assets, Raw Materials, Expenses, and other subjects

Taxes Payable - Payable Value Added Tax - Input Taxes

Taxes Payable - Payable Value Added Tax - to be offset against the inputs and credits

Credit: Bank Deposit

(2)When the non-deductible input tax amount occurs at the end of the period, the input tax amount is transferred out

Borrow: Costs and Expenses

Credit: Taxes Payable-VAT Payable - Input Tax Transfer

Taxes Payable - VAT Payable - To be Deducted Input Tax Credit

2. When the input tax credit is deducted from the tax payable in the period

Borrow: Taxes Payable - VAT Payable - Input Credits

Credit: Taxes Payable - VAT Payable - Input Credits to be offset

3. If there is still a balance of Input Credits to be offset upon expiration of the concession

Credit: Taxes Payable - VAT Payable - Input Credits to be offset

Borrow: Cost of Main Business

Credits offset, the accounts how to do processing? Through the content of the above information, we know the accounting entries of the addition of credit. The credit policy is in the specific circumstances of the taxpayer can also be practiced Oh! Do not apply to all the circumstances of the credit. In order to allow you to better understand the financial processing of the addition of credits, I also extended the introduction of the addition of credits at the end of the month accounting processing.