CERTIFICATE LEVEL

Subject Fundamentals of Financial Accounting (BA3)

Mallik De Silva
Lecturer FCMA, MSc, ACA, LTCL, Dip. IFRS (ACCA)

Module BA3 M Kit Chapter 12

Code BA3/MS/24
 Chapter 12

Accounting for Sales Tax

Question 126

A business entity which is liable to sales tax would the sales account with total
sales VAT.

(Debit, Credit, Including, Excluding)

Question 127

The following transactions took placed in X Ltd. (VAT 10%)

Credit sales 50,000 + VAT

Return inwards 8,000 + VAT
Credit purchases 20,000 + VAT
Return Outwards 2,000 + VAT
Printing expense 7,700 (inclusive of VAT)
Purchase of a motor car 22,000 (inclusive of VAT)
Entertainment Expense 1,000 + VAT

Required to state the balance in the VAT account. $ Dr. Cr

Question 128

X Ltd made taxable supplies of $161,000 (inclusive of VAT) of during a given period. In the
same period it’s taxable inputs amounted to 100,000 + VAT. You are required to state the
balance in the VAT account. (VAT 15%)

$ Dr. Cr

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 Question 129
November 2001 Q:1.8
S Ltd, which is registered for purposes of value added tax, bought furniture on credit terms
at a cost of $8,000, plus value added tax of $1,200.

What is the correct account entry?

DR CR
$ $
A Furniture 9,200
Supplier 9,200

B Furniture 8,000
VAT 1,200
Supplier 6,800

C Furniture 8,000
VAT 1,200
Supplier 9,200
D Furniture 8,000
Supplier 8,000

Question 130
May 2002 Q:1.13

In the quarter ended 31 March 2002, C Ltd had VAT taxable outputs, net of VAT, of $90,000
and taxable inputs, net of VAT, of $72,000.

If the rate of VAT is 10%, how much VAT is due?

A $1,800 receivable B $2,000 receivable C $1,800 payable D $2,000 payable

Question 131

X Ltd is registered for VAT. The following details are extracted for June 2009

$ (including VAT)
Sales Day Book 34,500
Purchases Day Book 11,500
Sales Returns Day Book 2,300
Purchases Returns Day Book 920

VAT Rate 15%

Opening Stock $14,000 and Closing stock $9000
VAT payable at the beginning $10,000 VAT paid during the period $8,000

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 a) What is the movement in the VAT account?
$......................... DEBIT / CREDIT.

b) What is the Gross Profit?

Question 132

The following details are available from RN Ltd.

1) VAT payable at beginning $ 20,000

2) Sales at Standard rate $ 100,000 (net value)
3) Purchases (including VAT) $ 44,000
4) VAT paid during the month$ 14,000

VAT Rate is 10%

a) What is the closing balance in the VAT account?

b) What is the movement in the VAT Account $..................Dr/Cr.

c) What is the Gross Profit?

Question 133

RM Ltd has furnished the following details.

Net VAT
$ $
Sales 50,000 5,000
Purchases 20,000 2,000
Sales Returns 5,000 500
Purchase Returns 1,000 100

Opening stock 12,000

Closing stock 14,000
Opening Payables 40,000
Closing Payables 35,000
Opening Receivables 58,000
Closing Receivables 49,000

Your are required to calculate the Gross Profit.

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 Question 134
May 2001 Q: 1.6
A business purchases a machine on credit terms for £15,000 plus value added tax (VAT) at
15%. The business is registered for VAT. How should this transaction be recorded in the
books?
Dr Cr
A Machinery 15,000
Creditors 15,000

B Machinery 17,250
Creditors 17,250

C Machinery 15,000
VAT 2,250
Creditors 17,250

D Machinery 17,250
VAT 2,250
Creditors 15,000

Question 135
November 2002 Q:1.25

In July 2002, a company sold goods at standard value added tax (VAT) rate with a net
value of £200,000, goods exempt from VAT with a value of £50,000 and goods at zero VAT
rate with a net value of £25,000. The purchases in July 2002, which were all subject to VAT,
were £161,000, including VAT. Assume that the rate of VAT is 15%.

The difference between VAT input tax and VAT output tax is

A. Dr £9,000
B. Cr £5,850
C. Cr £9,000
D. none of these

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