Category: Accounting

VAT paid by a taxable person on the purchase of goods and / or services, other than goods or services in respect of which VAT cannot be reclaimed, from another taxable person is known as . . .

Select ONE answer:

1. output credits.
2. input credits.
3. irrecoverable VAT.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Incorrect – There is no such thing as output credits – tax payable on supplies / sales is known as output tax.
2. Correct
3. Incorrect – Irrecoverable VAT is VAT paid which cannot be reclaimed. VAT paid by a taxable person on the purchase of goods and / or services, other than goods or services in respect of which VAT cannot be reclaimed, from another taxable person would be recoverable.
4. Incorrect

 

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A firm which sells goods, all of which are exempt from VAT . . .

Select ONE answer:

1. A cannot be charged VAT by any of its suppliers.
2. cannot be charged VAT by those who supply services to it.
3. is charged VAT by its suppliers, but may reclaim all of this VAT from HMRC.
4. is charged VAT by its suppliers and cannot recover all of this VAT from HMRC.

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 4

1. Incorrect – The firm will be charged VAT on the purchase of goods, services and other items which are not exempt or zero-rated.
2. Incorrect – The firm will be charged VAT on the purchase of services which are not exempt or zero-rated.
3. Incorrect – Firms selling goods which are exempt from VAT cannot reclaim VAT paid by them on purchases.
4. Correct

 

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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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A person is not obliged to register for VAT unless he has reason to believe that the total taxable turnover of his business activities will exceed, or has exceeded, the current registration limits . . .

Select ONE answer:

1. in any continuous twelve-month period.
2. in the next three-month VAT period.
3. in the twelve months ended on the previous 31 December.
4. in the most recent two-month VAT period.

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 – The VAT registration limits apply to any continuous twelve-month period.
2. Incorrect – The only significance of a two-month period in relation to VAT is that this is the period for which most businesses make a VAT return.
3. Incorrect – 31 December, although the end of many firm’s accounting period, has no particular significance in relation to VAT for many businesses.
4. Incorrect – As for answer B above.

 

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Which of the following statements best describes the treatment of VAT in the accounts of a VAT-registered firm?

Select ONE answer:

1. VAT is an expense arising from the sale of goods and services.
2. VAT is normally a liability, calculated by reference to the purchases and sales of goods, services and other items.
3. VAT is levied on customers and is payable by them to the HMRC.
4. VAT is collected by firms from their customers and is retained by the firms.

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 – VAT is not an expense for a VAT-registered firm. Therefore VAT should not appear in the profit and loss account (revenues and expenses should be shown exclusive of VAT). VAT will either be owed to or be recoverable from, the HMRC. This will be shown in the Balance sheet.
2. Correct
3. Incorrect – Customers pay VAT to the firms from whom they buy goods and services – they do not pay VAT directly to the HMRC.
4. Incorrect – VAT is collected by firms from their customers – but on behalf of the HMRC – to whom it must be periodically remitted.

 

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