VAT, as a separate item, is neither a receipt nor an expense of
the business in accounting terms VAT is not usually shown in a
properly prepared trading account or profit and loss account. But
if a business is registered for VAT, the balance sheet should show
1) the amount owed for VAT collected on sales and services.
This would be described as a current liability and C&E would be
a creditor of the business
and
2) the amount owed to the business as refund of VAT paid for
goods or services. This would be described as a current asset and
C&E would be a debtor to the business.
