Category: Accounting

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

 

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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.

A VAT-registered sole trader has the following VAT-inclusive transactions for a three-month VAT period.

• Sales £11,000
• Purchases for re-sale £5,500
• Other purchases £1,100

If the rate of VAT is 10%, all sales are liable to VAT and VAT can be reclaimed on all purchases, the sole trader’s VAT liability for the period is ….

Select ONE answer:

1. £340
2. £390
3. £400
4. £440

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 3

Sales incl. VAT = £11,000
VAT on sales = £11,000/ 110 * 10 = £1,000

Purchases incl. VAT = £5,500 (for re-sale) + £1,100 (other purchases) = £6,600
VAT on purchases = £6,600 / 110 * 10 = £600

VAT liability = VAT on sales – VAT on purchases = £1,000 – £600 = £400
Alternatively, this may be solved as follows: Value added (incl. VAT) = £11,000 – £6,600 = £4,400 VAT incl. in Value added (incl. VAT) = £4,400/ 110 * 10 = £400

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

 

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

The amount of VAT included in goods costing £200, inclusive of VAT at the rate of 21%, is …

Select ONE answer:

1. £31.50
2. £34.71
3. £42.00
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 2

Let Cost = 100%
Cost + 21% = 121% = £200
VAT = 21% = £200/ 121 ” 21 = £34.71
Proof: £200 – £34.71 = £165.29 and £165.29 + 21% = £200

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

 

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