Fa1, chapter 1 test question 7

okay after much frustration I realized where the 1.16 came from. it is 116/100 //face palms//

Net cost before discount = 3,000 After the 20% discount the net cost is 80% x 3,000 = 2,400. Sales tax of 16% has to be added: 16% x 2,400 = 384 Gross cost = 2,400 + 384 = 2,784 Or, gross cost = 2,400 x (1 + 0.16) = 2,400 x 1.16 = 2,784

Thank you so much for replying! I really appreciate the lay out above, as I understand it better. Can you help me with the working for q8? how and why is it 3600 to be paid to the government?

If it made no purchases, the sales tax of 4,600 has to be paid to the government. However, purchases (including 20% tax) of 6,000 were made. The net price would be 6,000/1.2 = 5,000 and the tax is 1,000 (check: net = 5,000 and tax is 20% of 5,000 = 1,000 so fross price is 6,000). Tax on purchases can be offset against tax on sales therefore 4,600 - 1,000 = 3,600 to be paid.

Hello, What does double entry book keeping mean? And what does capital mean?

Zohal.kabul, welcome to the Opentuition forums. Answering what double entry is would be difficult in a few paragraphs. I will try to direct you to relevant resources on this site. I think given your first question (within the context of the accounting equation and double entry) Capital would be defined in the following wa(as per ACCA definition)- 'the residual interest in the assets of a business after deducting all of its liabilities'. Hope this helps.

Zohal.kabul, please also see following link which I believe is linked to the course in which you are undertaking- https://opentuition.com/fia/fa1/ Hope this helps.