VAT and sage instant accounts - HELP!!

 Hello!

I've just started using sage instant accounts v15 for my business, a small shop. 

We have just registered for VAT so that we can claim it back. However, when entering purchases should I enter the price paid, including VAT, or excluding VAT. Since we will claim it back should I enter VAT as a prepayment instead or will sage do this for me?

Thanks for your help, as you can probably tell I am a complete novice when it comes to accounting software!