Mistaken VAT Recording

Solihull

During the early years of running a my new limited company VAT on purchases were recorded in the expectation that the company would soon reach the VAT threshold. In reality the company has not reached that threshold and is now not expected to do so. The results of recording the VAT on purchases is an accumulated negative VAT liability of -£7,634.95 showing on the balance sheet under the heading of VAT due.
Question - In order to remove this negative liability without going back over the years and reposting all of the purchases it must be reversed out using a contra between the VAT Due account and which other account?
Any help on this one would be most appredciated

Pennywise

It should charged to all the various purchase, expense and fixed asset addition accounts, which would mean analysing each transaction. And this is certainly what you must do if the figure of £7k is significant compared with the other figures in your accounts, which it would be if your turnover is below the £60k vat threshold. You may have to correct the earlier year accounts as they are clearly incorrect because the costs were understated by the amount of the vat.

Lawbag_2

I would image it has to be written off against PNL