Originally started in England, US, CANADA many years ago, and has since spread. England, Australia, and Canada are using VAT QUICKBOOKS CANADA, along with some other countries.
In QUICKBOOKS Canada it works this way. You buy something for $100.00 and the Vendors (SUPPLIER) Invoice has 5% VAT
So you record $100.00 Purchase, $ 5.00 VAT (Paid to Vendors), Total payable to the Vendor $ 105.00.
You sell the product lets say for $ 200.00 plus 5% VAT = VAT Invoice for $ 210.00.
You record Sales = $ 200.00 VAT (Collected from Customers) $ 10.00, amount due from Customer $ 210.00
You complete your VAT remittance advice and Report Sales $ 200.00 VAT Collected $ 10.00, Less VAT PAID (Input Tax Credit) $5.00 Amount due to the Government VAT $ 5.00.