Skip to content
Sign inRegister
How did your June exams go?

FA

FA Chapter 12 Questions Sales Tax

VIVA Subject Guide
 

68 Comments

  1. purnima12
    foe question no 3 the purchase tax is included in 590790 right so if we consider the amt without tax included x then it should be
    x+(17.5% of x)=590790
    1.175x=590790
    x=502800
    and for tax x=17.5% of 590790
  2. Prajwal Gowrish H S
    hello sir. in Q1, its right to deduct maintenance.. but why not deduct delivery and installation (since these are expenses as well) ??
  3. John MoffatTutor
    Delivery and installation are necessary costs of getting the computer in a position to work and so are capitalized.
    Maintenance is a running cost after the computer has been installed and so are a revenue expense and not capitalized.
  4. Salohiddin
    Good afternoon, teacher

    Q5 does say that If someone is not registered for Tax, then the amount paid for tax is Included in Purchase price


    is it because the amount paid for tax is not recoverable
  5. John MoffatTutor
    Yes, that is the reason. (Have you not watched our free lectures on this? :-) )
  6. DAVID
    Hi Sir, what does capitalize mean in Question 1?
  7. John MoffatTutor
    How much is treated as a non-current asset (have you not watched the earlier lectures?)
  8. Hnin Pann Phyu
    Hello, I have a question here. Why is output tax less input tax equal 25,000 Credit correct? I thought it was a debit. The difference figures appear on debit side as a closing balance on Tax Account. let me know the explanation, please. Thanks so much!
  9. John MoffatTutor
    The balance is carried forward on the opposite side (as explained in the earlier lectures on double entry bookkeeping). It is a credit balance because they are owing money to the state.
  10. Hnin Pann Phyu
    It's clear now. Thanks so much!
  11. John MoffatTutor
    You are welcome :-)
  12. Maxi
    I selected 25,000 credit balance of sales tax payable. However, got response that correct answer if Debit 25,000 I am puzzled.
  13. John MoffatTutor
    If you are referring to question 2, then you didn't get that response. Our answer shows the correct answer as being a credit balance and that is correct,
  14. Enibukun
    In question number two where did the 120 come from?
  15. John MoffatTutor
    The sales include tax at 20%. Therefore for every 100 sales before tax they will add on 20 tax and the price including tax will be 120.

    So the tax will be 20/120 of the tax inclusive sales.
  16. Sandesh
    If value (Sales or Purchase) is given including tax, to calculate tax you should use formula:

    Value x Rate of Tax/100+Rate of Tax = Tax Amount

    270000 x 20/120 = 45000
  17. Linet
    If Allison is not registered for sales tax why are we adding it to the total amount? the last question
  18. John MoffatTutor
    The supplier will charge tax whether or not Alison is registered.
  19. Hiba
    my apology for my previous question wasn't clear , in Q4 why its payable not receivable ???
  20. John MoffatTutor
    Because they collected more tax from customers than the tax they suffered, so the difference is owed to the state.
  21. Hiba
    why is payable ?
  22. ammie
    thank you John great lectures. though i still struggle with the accounting entries :(
  23. John MoffatTutor
    Thank you for your comment :-)
  24. Haruna
    80% for the first time thanks alot
  25. nikoloz20001
    17.5/117.5x590790=87990
    there is 87900 written
  26. John MoffatTutor
    True but it is clearly a tiny typing mistake because the next line is correct and the final answer is correct :-)
  27. emvee_16
    For question 1, what if the entity was NOT registered for sales tax..would the sales tax be capitalised?
  28. John MoffatTutor
    Yes (although only the tax on the otherwise capitalised amount - the tax on the remainder increases the expense)
  29. emvee_16
    Thank you, but I would like to clarify one thing what do you mean by "tax on the remainder"? And did you mean that sales tax IS CAPITALISED for entities that are NOT registered for sales tax? Is yes then why is it that way?
  30. John MoffatTutor
    No I did not write that!

    If a business is not registered then the cost of something is the cost including the sales tax, and the sales tax is not recorded separately.

    This total amount (including the sales tax on it) is capitalised if the expenditure is on something that should be capitalised (such as the cost of a machine).
    The total amount (including the sales tax on it) is recorded as an expense in the SOPL if the expenditure is on something that is not capitalised (such as maintenance costs).
  31. emvee_16
    Oh ok. I misunderstood previously. Now I get it, thank you very much. Your website is really helpful
  32. John MoffatTutor
    You are welcome :-)
  33. Joseph Acca
    I thank Allah to start with.
    Next, thanks to the management and staffs of Opentuition.com. I manage to get 100%
  34. John MoffatTutor
    Well done :-)
  35. asdasdas
    Hi. Why do we deduct tax on purchases ?
  36. John MoffatTutor
    The tax due to or from the state is the total of the tax charged on sales less the total of all tax suffered.

    I do explain all of this in my free lectures on sales tax.
  37. asdasdas
    Thank you!
  38. Kainos
    decrease and increase in allowance for doubtful debts what are the effects of netprofit
  39. John MoffatTutor
    An increase in the allowance reduces profit. A decrease in the allowance increases profit.

    This is all explained in my free lectures on irrecoverable debts and allowances. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
  40. faith
    thank Sir i really appreciate you..
  41. John MoffatTutor
    Thank you for your comment :-)
  42. lukui01
    Question 4 says the taxable sales and the taxable purchases are ''net of sales tax'', so doesnt that mean the 90000 and the 72000 were exclusive of sales tax, if so wouldnt the answer be 2000 payable instead of 1800 payable
  43. John MoffatTutor
    The amounts are exclusive of tax. Therefore the tax charged on sales is 10% x 90,000 and the tax suffered on purchases is 10% x 72,000.
  44. izaz
    Sir the questions is taken from the past exams or created by you.
    Great respect to you sir
  45. John MoffatTutor
    The ACCA does not release past exams for Paper FA.

    Do appreciate these tests are just short tests and it is vital that you buy a Revision Kit from one of the ACCA approved publishers. The Revision Kit is full of exam standard questions in all the different formats that are used in the exam.
  46. MohamedSupporter
    These questions are easy. I got all correct. I woudn't have achieved 100% without open tuition lectures. Really want to thank all of the open tuition tutors especially Mr. John sir.
  47. John MoffatTutor
    Thank you for your comment :-)
  48. eedoontoh
    5 questions aren't enough for revision. Please add more quedtions
  49. John MoffatTutor
    No - you must buy a Revision Kit from one of the ACCA approved publishers as we continually say on this website.
    The short tests are only meant as a quick check on each chapter.
  50. Camille
    I catch it so quickly n easy. Only the last question I got wrong but I understand after all.
  51. John MoffatTutor
    Great :-)
  52. mkaur89
    Hi

    in Question 3 it states that 579790 is inclusive of tax. when calculating the tax at 117.5% I get the answer of 86351.70, could you please explain why this is rounded up to 87990?

    thanks
  53. John MoffatTutor
    The question says that the purchases are 590,790 (not 579790) and the answer is correct - it has not been rounded :-)
  54. mkaur89
    thanks sorry I think I miss read the question now looking at it again I am able to work it out

    :)
  55. John MoffatTutor
    No problem :-)
  56. maur33n
    hi,kindly clarify on the answer for question 2, why is the balance at the end of the period on the credit side instead of the debit side?
  57. John MoffatTutor
    The tax collected on the sales is more than the tax suffered on the purchases and therefore there is a liability owing to the state. Liabilities are always credit balances.
    Do watch the free lectures on this.
  58. maur33n
    i will watch the lectures ,thank you for taking time to reply
  59. John MoffatTutor
    You are welcome :-)
  60. larisel
    Hello,

    please check the answer from question 3 and correct the result from tax on purchases. Correct answer shouldn't be 87990?.

    Regards,

    Larisa
  61. John MoffatTutor
    Thanks - I will correct it. It was just a simple typing error.

    However the final answer is, of course, correct! :-)
  62. shiba
    Regarding question 1. can a tax charged on a non current asset for use in the business itself be recovered? i'm confused because it is not bought for resale. right?
  63. eleanor123
    when a company makes sales inclusive of tax does the tax deoartment owe them or they owe the tax department?
  64. John MoffatTutor
    They the company owes the tax to the state.

    You really should watch my free lectures on this!! (The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well)
  65. Rachel
    John

    Why would installation and delivery be capitalized? Wouldn't those just be expenses for the business when buying the computer much like Maintenance? I know I'm wrong, maybe I'm forgetting a discussion from a previous chapter!

    Thanks :)
  66. John MoffatTutor
    Installation and delivery are costs that are need to have the machine working in your building in the first place, and will only be paid the one time.
    Maintenance is not needed to get it to start working, but is an expense that will be needed later to keep it working, and will be payable every year (like repairs).
  67. yaya700
    What about additional memory? That certainly doesn't need to get the computer up and running, does it?
  68. John MoffatTutor
    Additional memory is capital expenditure.

Leave a comment