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Purchase return involving sales tax

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Purchase return involving sales tax

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 31, 2023 at 9:52 am #694233
    najiharmmed786@gmail.com
    Participant
    • Topics: 14
    • Replies: 21
    • ☆

    Hello Sir..!

    Good day to you…

    Could you kindly clarify a doubt regarding another question from Kaplan Kit 2023-24

    Qn 339

    Peach Co returned faulty goods to a supplier and received a credit note from the supplier.
    When recording the credit note in the accounting system, Lime Co omitted to account for
    sales tax and, instead posted the gross amount of $1,296 to the returns outwards account.
    Both Peach Co and the supplier are registered to account for sales tax at the rate of 8%.
    What journal adjustment should Peach Co make to correct this error?

    A Dr Sales tax $96, and Cr Cash at bank $300
    B Dr Sales tax $96, and Cr Payables $250
    C Dr Sales tax $96, and Cr Returns outwards $96
    D Dr Sales tax $96, and Cr Purchases $250

    My understanding is that the correct entry should have been:

    Dr Payables 1296
    Cr Purchase return 1200
    Cr Sales tax 96

    But they wrongly posted:

    Dr Payables 1296
    Cr Purchase return 1296

    To rectify this,

    Dr Purchase Return 96
    Cr Sales tax 96

    There does not seem to be such an option..

    Isn’t this the correct answer?

    I would really appreciate your help. Thanks in advance.

    October 31, 2023 at 3:25 pm #694246
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    Are you sure that you have copied the question correctly?

    The reason I ask is that if it had been Peach that had made the error then what you have typed would be correct.

    However it seems that it was Lime who made the error, but the question does not state who Lime is (presumably they are the supplier). If Lime made the error then there is nothing for Peach to correct!!!

    Have you check on the Kaplan website to see if there is an errata sheet correcting their errors?

    October 31, 2023 at 4:16 pm #694252
    najiharmmed786@gmail.com
    Participant
    • Topics: 14
    • Replies: 21
    • ☆

    Yes sir, I cross checked and the question I copied is same.

    It seems that I overlooked that part where they say Lime is the one who made the error.

    As you pointed out , if Lime made the error, the options provided does not seem to give a correct answer.

    Also ,I checked the kaplan website but I couldn’t find anything useful.

    November 2, 2023 at 8:35 am #694303
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    The question as they have set it seems to be in error. If Lime has made an error recording then there is nothing for Peach to correct!

    November 3, 2023 at 11:40 am #694349
    najiharmmed786@gmail.com
    Participant
    • Topics: 14
    • Replies: 21
    • ☆

    Thanks for the clarification.

    November 3, 2023 at 5:19 pm #694355
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54668
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘Purchase return involving sales tax’ is closed to new replies.

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