Thanks for this important video lecture sir, I finally understand the concept of VAT.

You know I was trying another calculation, and it was messing up my answer – maybe would know the reason.

For eg 2 for instance, To find the tax exclusive price, I tried this = 120 x 0.84 [Because to find value inclusive we can add 0.16 to 1 and make it 1.16 and then multiply to get the number 120, then why not the other way be possible 1-0.16= 0.84. Use this reversed number and multiply it with 120 to find the exclusive price?). And the answer was 100.8.

The correct answer was 120/1.16 = 103.45
120/116 x100 = 103.45.

Not your question but sales tax related. The following trans took place during Alan’s first month of trading
Credit sales of $121000 exclusive of sales tax
Credit purchases of $157110 inclusive of sales tax
Cash payments to credit suppliers of $82710 inclusive of sales tax

all transactions are subject to 20% sales tax- What was Alan’s sales tax account at the end of his first month of trading?
I answered : 15770 DR but answer was $1985 DR. Why was the cash payment sales tax not counted on Alan’s Sales tax account because he would have separated it so he could claim it back? I know its not your question but intrigued

In future please ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture.

The cash paid is not for extra purchases. It is payment of part of the amount for the purchases on credit. The sales tax is accounted for then the purchases were made.

I am struggling with your example as in if the tax is on the final price of the product the your example doesn’t add up as 20% of 12 is 2.4 and 20% of 6 is 1.2 and so on.

Asif110 says

Thanks for this important video lecture sir, I finally understand the concept of VAT.

You know I was trying another calculation, and it was messing up my answer – maybe would know the reason.

For eg 2 for instance, To find the tax exclusive price, I tried this = 120 x 0.84 [Because to find value inclusive we can add 0.16 to 1 and make it 1.16 and then multiply to get the number 120, then why not the other way be possible 1-0.16= 0.84. Use this reversed number and multiply it with 120 to find the exclusive price?). And the answer was 100.8.

The correct answer was 120/1.16 = 103.45

120/116 x100 = 103.45.

I wonder where the logic went wrong…

tkhue3296 says

The drawing really picasso haha,

John has a gift .

artipha says

hello Sir!

Not your question but sales tax related. The following trans took place during Alan’s first month of trading

Credit sales of $121000 exclusive of sales tax

Credit purchases of $157110 inclusive of sales tax

Cash payments to credit suppliers of $82710 inclusive of sales tax

all transactions are subject to 20% sales tax- What was Alan’s sales tax account at the end of his first month of trading?

I answered : 15770 DR but answer was $1985 DR. Why was the cash payment sales tax not counted on Alan’s Sales tax account because he would have separated it so he could claim it back? I know its not your question but intrigued

John Moffat says

In future please ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture.

The cash paid is not for extra purchases. It is payment of part of the amount for the purchases on credit. The sales tax is accounted for then the purchases were made.

John Moffat says

yusifbayli: Thank you for the comment 🙂

yusifbayli says

All lessons very useful thanks for everything.

yaso87 says

Hi,

Thanks for the lectures, they’re very helpful.

I am struggling with your example as in if the tax is on the final price of the product the your example doesn’t add up as 20% of 12 is 2.4 and 20% of 6 is 1.2 and so on.

yaso87 says

Never mindI just realised this is VAT not normal tax.

John Moffat says

I am pleased that you have sorted it out 🙂