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What is VAT?
Imagine you run a small business selling hoodies. VAT is a government tax added on top of the price — and you're going to be the one collecting it.
YOU BUY
From your supplier
1 × hoodie€40.00
+ VAT (23%)€9.20
You pay€49.20
→you add a markup
and resell
and resell
YOU SELL
To your customer
1 × hoodie€60.00
+ VAT (23%)€13.80
They pay€73.80
!
That €13.80 is NOT the business' money
The business collected it on behalf of the government — it's just holding it for them. At the end of the month it goes to Revenue.
HOW MUCH DO YOU OWE REVENUE?
€13.80
−
€9.20
=
€4.60
VAT you collected on sales − VAT you paid on purchases = what you hand over.
Analysed Cash Book
ACB
DR · Receipts in+
| Date | Detail | Bank | Sales | VAT |
|---|---|---|---|---|
| 31/01/26 | Hoodie sale | 73.80 | 60.00 | 13.80 |
CR · Payments out−
| Date | Detail | Bank | Purchases | VAT |
|---|---|---|---|---|
| 31/01/26 | Stock — hoodie | 49.20 | 40.00 | 9.20 |
Bank = Sales/Purchases + VAT · only the VAT column posts to the VAT account
VAT figures post to the VAT ledger
VAT Account
T-A/C
DR · VAT on purchasespaid
CR · VAT on salesgot
Balance b/d €4.60 on the credit side = the VAT liability owed to Revenue
Why VAT?
VAT is a major source of government revenue. The money raised funds public services like roads, hospitals, schools, the Gardáí and social welfare.
23%
Standard rate
Most goods and services — clothes (incl. our hoodie), electronics, petrol, alcohol
13.5%
Reduced rate
Building services, new houses, cleaning, fuel for heating
9%
Second reduced
Hospitality — restaurants, hotels, hairdressing — plus gas and electricity
0%
Zero rate
Essentials — children’s clothes and shoes, school books, most food, oral medicines
Lower rates apply to essentials (children’s items, food, books) and important sectors (housing, hospitality) to keep them more affordable.
jcbusinesshub.com · Junior Cycle Business · Accounts
