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ACCA F3 Sales Tax (part b)
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HI sir.
Can you kindly explain me how to calculate net tax for purchases inclusive of tax.
i got stuck in practice question no. 3
But I explain how to calculate it in the lecture!
Sir you explained about the sales inclusive tax,that how shall we calculate it but purchases inclusive tax i am not able to do it.
i am stuck in question 3 in the practice exam.
It is exactly the same for purchases as it is for sales. So for question 3 the tax is 17.5/117.5 x 590,790
Right. Thank you sir. Sorry it was my calculation mistake. 馃檪
You are welcome 馃檪
Mr. Moffat,
Sales Tax Account is treated as an Expense or a Liability?
It is a liability if we owe sales tax to the state; it is an asset if the state owes sales tax back to us.
John
I’m using the March/June 2016 notes and there is no mention of discounts (the notes end after example 4) Am I correct in assuming that I need not know that for the June ’16 exam, and therefore ok if I skip that part of the lecture?
Thank you and excellent lecture!
Yes – skip that part of the lecture.
(Discounts on their own are examinable and are covered in the lectures on control accounts, but don’t worry about the effect on sales tax)
sir sorry to be asking alot of question
if the sales tax account show an opening credit balance of 4540 at the beginning of the month and a closing debit balance 2720 at the end of the month do we net it off
No!
An opening credit balance at the start of the month means that they started the month owing money to the state.
During the month they will have collect tax (meaning more owing to the state) and will have suffered tax (meaning less owing to the state).
The balance at the end of the month is the net of these figures and is the amount owing to or from the state at the end of the month.
so sir if i am correct when drawing up this month t account is it ok for me to put it the debit 2720 and credit 4540 respectively and then continue with the other transaction and then balance it off
i was working a question and they put both th c/d and b/d on the same side
The balance at the end of the period could be on either side depending on whether they owed money to the state or whether the state owed money to them. The balance is simply the missing figure on the account to make it balance.
I do suggest that you watch the earlier lectures on double entry bookkeeping,
In future you must ask questions like this in the Ask the Tutor Forum and not as a comment on a lecture.
sir if i am correct for this syllabus the discount part is not necessary
I don’t think it is (because it is a tax rule rather than an accounting rule).
However, Kaplan does think it can be asked!
So to be safe I have left it in the lecture.
Test question 2, why is maintenance cost not cpaitalised as a non-curretn asset? is it charged elsewhere?
It is not a necessary cost to install the machine. It will be a cost every year and it will be charged as an expense in the Statemt of profit or loss
Test question 2. I don’t understand why 5% settlement is being added. How do I also know if the sales tax has been included in the list price of goods for sale.like in this example.
Please explain.
This question is a little bit unfair (and I will remove it in the next edition).
However the tax rule is that the sales tax is calculated subtracting all discounts. The settlement discount is only given if the customer pays within whatever time limit we give (which is why the full amount is show as receivable until we find out if they pay on time or not) but the sales tax is always calculated assuming that they will take the discount.
Again, because that is a tax rule (and this is not a tax exam) it is a bit unfair which is why I will remove this question.
Sir, it is not very clear from tax point of view: Normally we should charge 18% tax on the sale=960*18%=172.8, but we charge less(164.16). In my country this would be tax calculation error and imply tax penalties. Tax is always calculated as a fixed percentage on the amount you declare as a sale. You cannot declare a certain amount, and then calculate 18% on a different amount..
Second: What if customer fails to pay in advance: It would imply that our tax is lower than it should have been: our sales amount is 960, tax 18% should be applied on this amount. Are you sure sales tax must not be recalculated in this case?
Yes, I am 100% sure! It is the tax rule in the UK.
However you will have noticed that the example is not any longer in the Lecture Notes (which I assume you have downloaded because otherwise there is no point in watching the lectures). I am going to remove the lecture as well because (as I wrote in response to an earlier question below, it would now be unfair for it to be asked in F3 since it is a tax rule rather that an accounting rule.
For your information. The tax authorities do not have a problem with this for two reasons – firstly such discounts are usually only given from business to business and so the customer business only can claim back the VAT charged – the net effect to the tax authorities is zero. Also they do say that the discount must be a commercial rate which means it would only ever be pretty small and so the affect on the amount of tax would be very small.
Hello sir,
I cant seem to find example 5 in the course notes for chapter 12 馃檨
No – it has been removed and I will also remove it from the lecture.
The reason is that it is a UK tax rule and as such should not be asked in Paper F3 because it is not a tax exam.
Hello Sir,
On the test 2 question after this chapter. Could you explain why the delivery and installation on the Computer would be classed as a Non-Current Asset?
It is effectively part of the cost of the computer. We include all costs involved in getting it to a working state, and deliver and installation were necessary to have it working.
so I understand that, sales tax isn’t representing in inc statement. if it is not paid until end of year it will shown in statement of financial position? under liabilities?
That is correct. If it has not been paid it is a current liability.