Accounting Multiple Choice Question – 20 September 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

At the beginning of a VAT period, a firm which buys and sells exclusively on credit owed £2,000 to HMRC in respect of VAT.

Its credit sales and credit purchases for the period, inclusive of VAT at the rate of 20%, amounted to £72,000 and £48,000 respectively.

During the period the firm paid £3,000 to HMRC in respect of VAT.

What was the balance carried down on the firm‘s VAT account at the end of the period?

Select ONE answer:

  1. £3,000 Debit
  2. £3,000 Credit
  3. £3,400 Debit
  4. £3,900 Credit

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 1

VAT on sales = £72,000/ 120 * 20 = £12,000
VAT on purchases = £48,000/ 120 * 20 = £8,000

VAT balance b/d (credit entry) = £2000
VAT on Sales (credit entry) = £12,000
Total Credit entries = £14,000

VAT on purchases (debit entry) = £8,000
Bank payment to HMRC (debit entry) = £3,000
VAT balance c/d (debit entry) = £3,000
Total debit entries = £14,000

  1. Correct
  2. Incorrect
  3. Incorrect
  4. Incorrect

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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