Month: September 2019

The payment by a firm of its VAT liability for a taxable period should initially be recorded in its …

Select ONE answer:

1. journal.
2. cash book (or cheque payments book).
3. sales daybook.
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
2. Correct – All cash/cheque payments, irrespective of what the payment relates to, are initially recorded in the cash book (or cheque payments book).
3. Incorrect
4. Incorrect

 

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During an accounting period, a VAT-registered firm incurred advertising expenditure totalling £12,500, including VAT at the rate of 25%.

The charge for advertising which should be shown in the firm’s profit and loss account for the same period is …

Select ONE answer:

1. £9,375
2. £10,000
3. £15,000
4. £15,625

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
2. Correct – In cases where VAT is recoverable, expenses should be shown in the profit and loss account net of VAT. Therefore, the amount of the expense which should be shown in this case is £12,500/ 125 * 100 = £10,000. (£10,000 + 25% = £12,500).
3. Incorrect
4. Incorrect

 

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The irrecoverable VAT on the purchase of fixed assets should be . . .

Select ONE answer:

1. shown as an expense in the profit and loss account for the period in’ which the asset is purchased.
2. shown as part of the cost of fixed assets in the balance sheet.
3. deducted from any VAT payable on sales.
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 – The only irrecoverable VAT which should be shown as an expense in the profit and loss account for a period is irrecoverable VAT relating to expenses incurred during that period.
2. Correct
3. Incorrect – Irrecoverable VAT cannot be offset against any VAT payable on sales.
4. Incorrect

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

In the Profit and Loss Account of a VAT-registered firm, the sales figure . . .

Select ONE answer:

1. should be exclusive of any VAT charged on sales.
2. should exclude cash sales.
3. should exclude credit sales.
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 1

1. Correct
2. Incorrect – The sales figure shown in the profit and loss account should be the total of cash sales and credit sales exclusive of VAT.
3. Incorrect – As for answer B above.
4. Incorrect

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A VAT-registered car dealer allows a customer £6,500 (including VAT at the rate of 21%) for his used car as a trade-in against a new car, the retail price of which is £15,000 (including VAT at the rate of 21%).

As a result of this transaction, the car dealer is liable to pay VAT of ….

Select ONE answer:

1. £1,475.21
2. £1,785.00
3. £3,150.00
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 1

Net sale incl. VAT = £15,000 – £6,500 = £8,500
Net sale excl. VAT: £8,500/ 121 * 100 = £7,024.79
VAT on net sale = £7,024.79 * 21% = £1,475.21

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

 

This work is licensed under a Creative Commons Attribution 4.0 International License.