If a firm produces only one product, product X, which is zero-rated for VAT purposes, then . . .
Select ONE answer:
- VAT is payable by the firm on its sales of product X and VAT is recoverable by it on its purchases of raw materials used in the production of product X.
- VAT is not payable by the firm on its sales of product X and VAT paid on purchases of raw materials used in the production of product X is recoverable.
- VAT is not payable by the firm on its sales of product X and VAT is not recoverable on its purchases of raw materials used in the production of product X.
- None of the above.
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Incorrect – As product X is zero-rated VAT is not payable on sales of this product.
- Correct
- Incorrect – This would be the case if product X was exempt from VAT, not zero-rated.
- Incorrect
This work is licensed under a Creative Commons Attribution 4.0 International License.