Fa1, chapter 1 test question 7

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

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.

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.