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Hi to you as well!
Is that your question?If you watch my lecture here on sales tax then you will find the answer 🙂
(It is free to watch, obviously)sorry I am having trouble to post the question, it keeps saying Topic cannot be posted.
Prepare journal entries to show how the following transactions in July Year 8 should be recorded in the main ledger accounts of entity DZ. VAT is charged at the rate of 15%.
1) Credit Sale of $250,000 EXCLUDING VAT.
2) Credit Sales of $10,000 EXCLUDING VAT.
3) Purchases of $108,100 INCLUDING VAT.The answers given:
1) Trade Rec DR 287,500 1) Sales CR 250,000 1) VAT CR 37,500
2) Bank DR 11,500 2) Sales CR 10,000 2) VAT CR 1,500
3) Purchas. DR 94,000 3) VAT DR 14,100 3) Trade Pay CR 108,100My answers:
1) Trade Rec. DR 294,117.65 1) Sales CR 250,000 1) VAT CR 44,117.65
2) Bank DR 11,764.71 2) Sales CR 10,000 2) VAT CR 1,764.71
3) Purchas. DR 91,885 3) VAT DR 16,215 3) Trade Pay CR 108,100Well your reply has appeared OK, so try replying again with your question 🙂
(In the exam they will not use the word VAT – they will call it sales tax).
The tax is always calculated on the net amount.
So….for (1) the net amount is 250,000 and so the tax is 15% x 250,000 = 37500.The same applies for (2) – the net amount (excluding tax) is 10,000 and so the tax is 15% x 10,000 = 1500.
(I don’t know if you have typed out the question correctly, but if they are credit sales then you do not debit bank – you debit receivables!)For (3) the gross amount is 108,100, but the tax is on the net amount and so is 15/115 x 108,100 = 14,100.
I don’t know if you have watched my lecture – it seems not. In which case I think you will find it useful 🙂
it does say sales tax and not VAT, and 2 was meant to be a cash sale sorry, hence bank. And I think I actually get it now, but just to be extra sure, I’m off to watch your lecture 🙂 thank you so much John.
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