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Suppose X is a VAT registered company.
X issued an invoice to Customer A, but forgot to include VAT. For example, X forgot to charge £2 of VAT on the £10 invoice to Customer A. The mistake was only realised after the invoice was issued.Suppose X does not correct the mistake. How would this affect profit?
I have an exercise whose solution says that profit will stay the same. But how can this be? X is VAT registered, so still need to hand over to HMRC the output VAT out of their own pocket because they did not collect the VAT from the customer. Does this mean increased expenses and hence decreased profit?
What a strange question and I am sure not a question you would ever be asked in an exam for TX.
Please concentrate on what the exam will contain and not “suppose”…..Thanks. I also found that it was not the best question in the world (it was taken from an exercise. I didn’t invent this question). I won’t worry too much about it. Thanks for your reply. It is reassuring.
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