Day: September 6, 2019

If a firm produces only one product, product X, which is zero-rated for VAT purposes, then . . .

Select ONE answer:

1. 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.
2. 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.
3. 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.
4. 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

1. Incorrect – As product X is zero-rated VAT is not payable on sales of this product.
2. Correct
3. Incorrect – This would be the case if product X was exempt from VAT, not zero-rated.
4. Incorrect

 

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